Evaluate the following loan based on capacity
John Doe and Jane Smith
John and Jane are married, and would like to borrow for a car purchase. They will be trading in Jane’s existing car as a down payment. They are both 35 and have 2 children, aged 7 and 5. John makes $91000 annually as the junior manager of Plus 9 Distributing. After deductions, he keeps 66% – he has been there 8 years. Jane does not work.
They bought their house a number of years ago for $390000 and estimate it is now worth $500000. Annual property taxes are $5200 and they pay $125 monthly for heat. They pay $975 monthly on the mortgage which has a balance owing of $295000. They owe $3500 on an unsecured line of credit (which has an $6000 limit) and they pay the minimum on this. They also owe $1,000 on Visa with a $3500 limit, and $1,500 on Mastercard with a $300p limit. They own 2 cars, valued at $10,000 each. John’s has a $6500 loan on it with monthly payments of $425. Car insurance $300 combined per month: House insurance is $700 per year, Rogers communication for phone, internet etc. is $140 per month: Jane also contributes $100 per month to her RRSP. They have $2,000 in their bank account and RRSPs of $55.000. All their debts are rated R1 or 11, and the highest historical rating is an R2 on the mortgage from 2 years ago
What is the most you would lend them based on TDSR limits using a loan rate of 4.7% over 5 years? Monthly payments and compounding
