Question

jordon liu has just been hired for a new job, which pays an annual salary of $50,000. jordon would like to purchase a home closer to the new workplace, and requires a loan of $200,000 over a 25-year amortization period with monthly payments. property taxes are $1,500 per annum and the market interest rate is 5.45% per annum, compounded semi-annually. what is the gross debt service ratio?

Answer 1

The gross debt service ratio is calculated by dividing Jordan Liu's total annual housing expenses, including mortgage and property taxes, by his annual income and multiplying by 100 to express it as a percentage. Without the exact mortgage payment, the GDSR can't be finalized, but the steps to calculate it when the exact mortgage payment is known have been outlined.

Step-by-step explanation:

The gross debt service ratio (GDSR) is a financial metric used by lenders to determine if an individual can afford the costs associated with a mortgage. To calculate it, we need to know Jordan Liu's annual housing-related expenses and his annual salary. Housing-related expenses include the mortgage payment, property taxes, and any other required monthly housing expenses such as condominium fees or homeowner's insurance.

Mortgage Payment: Calculating the mortgage payment for Jordan's $200,000 loan at an interest rate of 5.45% compounded semi-annually over 25 years would require using the present value of an annuity formula, but since the question primarily seeks the GDSR, let's proceed with a general understanding that the mortgage payment can be calculated using financial calculators or formulas. Property Taxes: These are $1,500 per annum.