Shaun and Camila are refinancing their mortgage. In order to do so, they need to meet with the bank to run through some ratios. They are quite nervous as their credit score is not the greatest so they are hoping that the ratio calculation helps them in securing the refinancing. Calculate their Total Debt Service (TDS) ratio based:
Shaun's annual gross salary: $90,000 and Camila's annual gross salary: $91,000
Monthly mortgage payment: $2,150
Annual property taxes: $2,400
Monthly heating: $160
Annual condo fees $600
Shaun's monthly student loan $70
Camila's monthly car loan $125
Monthly furniture loan $30
First, let's calculate Shaun and Camila's total monthly income:
Shaun's monthly income = $90,000 / 12 = $7,500
Camila's monthly income = $91,000 / 12 = $7,583.33
Total monthly income = $7,500 + $7,583.33 = $15,083.33
Next, let's calculate their total monthly expenses:
Monthly mortgage payment = $2,150
Monthly property taxes = $2,400 / 12 = $200
Monthly heating = $160
Monthly condo fees = $600 / 12 = $50
Shaun's monthly student loan = $70
Camila's monthly car loan = $125
Monthly furniture loan = $30
Total monthly expenses = $2,150 + $200 + $160 + $50 + $70 + $125 + $30 = $2,785
Now, let's calculate their Total Debt Service (TDS) ratio:
TDS ratio = (Total monthly expenses / Total monthly income) x 100
TDS ratio = ($2,785 / $15,083.33) x 100
TDS ratio = 18.46%
A TDS ratio below 40% is generally considered acceptable by most lenders, so Shaun and Camila's TDS ratio of 18.46% is well within the acceptable range. This should help them in securing the refinancing they are looking for.