Humber/Ontario Real Estate Course 3 Exam Practice

Buyer Asadi has a monthly PIT (Principal, Interest, Taxes) payment of $1,800 and an annual income of $67,000. What is the GDS (Gross Debt Service) ratio?

1. 14.5%

2. 32.2%

3. 31.2%

4. 33.2%

5. 28.5%

6. 35.0%

The correct answer is: 32.2%

To calculate the Gross Debt Service (GDS) ratio, you need to understand the components involved. The GDS ratio is a measure used by lenders to assess the portion of a borrower's gross income that goes toward housing costs. The GDS includes principal, interest, property taxes, and usually 50% of condominium fees if applicable. In this case, Asadi's monthly PIT payment is $1,800. To find the GDS ratio, the monthly PIT payment is divided by the borrower's gross monthly income. First, calculate the gross monthly income from the annual income: 1. Annual income: $67,000 2. Monthly income: $67,000 ÷ 12 = $5,583.33 Next, divide the monthly PIT payment by the gross monthly income: 1. GDS = (Monthly PIT payment ÷ Monthly income) × 100 2. GDS = ($1,800 ÷ $5,583.33) × 100 3. GDS ≈ 32.22% Thus, rounding to the nearest tenth, Asadi's GDS ratio is approximately 32.2%. This indicates that about 32.2% of Asadi's gross income is dedicated