    # Calculating Monthly PI Payment Based on TDS

Here’s an example that may help clarify how to calculate PI payments when a TDS is involved.Anycity Lending Inc. is assessing Buyer Gordon’s financial abilities to buy a resale home for \$397,500. The borrower has an annual income of \$90,000 with monthly credit card payments of \$450. The property’s estimated annual property taxes are \$5,600. If the borrower requires a \$357,000 mortgage at 4.75%, what is the maximum monthly PI payment that the buyer can qualify for based on the lender’s 40% TDS ratio?

Solution:

• First, calculate the maximum total debt payment permitted based on a 40% TDS ratio: \$90,000 x .40 = \$36,000.
• Next, annualize the credit card payments: (\$450 x 12) = \$5,400.
• Subtract both the annual credit card payments and the annual taxes from \$36,000: \$36,000 – (\$5,400 + 5,600) = \$25,000. This represents the maximum annual PI payments, which must be then divided by 12 to arrive at the monthly PI payments: \$25,000 ÷ 12 = \$2,083.33.

Tip: The sale price and mortgage information are extraneous and not required to arrive at the correct answer.

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