Determine laurie gross debt service

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Laurie has been renting an apartment for a few years and is considering buying a house. Her gross annual income is $48 000. Laurie finds a house she likes, with a cost of $145 000. She has saved up enough money to cover the closing costs plus an additional $25 000 for a down-payment.

Problem a) Laurie's down payment is less than 25% of the purchase price, therefore she must pay mortgage insurance. A premium of 1.75% of her mortgage amount is added to the principal. Determine the total mortgage Laurie requires.

Problem b) The mortgage is amortized over 25 years, with an interest rate of 7.25% /a, compounded semi-annually. Use the TVM Solver to determine Laurie's monthly mortgage payments.

Problem c) The annual taxes on the house are 1.35% of its value. Determine the amount of taxes Laurie must pay monthly.

Problem d) The previous owner of the house calculated that the annual heating expenses were $1200. Laurie still has a monthly student loan of $150 and a monthly car payment of $400. Determine Laurie's Gross Debt Service and Total Debt Service ratios. Based on these values, comment on the affordability of this house.

Reference no: EM132954153

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