Humber/Ontario Real Estate Course 2 Exam Practice

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Prepare for the Ontario Real Estate Exam with our comprehensive Humber Course 2 Exam Practice quiz. Engage with multiple choice questions and detailed explanations, designed to help you excel.

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What is the GDS ratio if a buyer has an income of $45,000, and monthly mortgage and property tax payments total $1,200?

  1. 27%

  2. 32%

  3. 31%

  4. 35%

  5. 28%

  6. 30%

The correct answer is: 32%

The GDS ratio, which stands for Gross Debt Service ratio, is a crucial indicator used by lenders to assess a borrower's ability to manage their housing costs. It represents the percentage of the borrower's gross income that is needed to cover housing expenses. To calculate the GDS ratio, you divide the annual total of mortgage principal and interest, property taxes, and 50% of condo fees (if applicable) by the borrower's annual income. In this case, the buyer's annual income is $45,000, and the monthly mortgage and property tax payments total $1,200. To find the annual housing expenses, you would multiply $1,200 by 12 (months) to get $14,400. Since only monthly mortgage and property tax payments are provided, we will assume no condo fees for this calculation. Now, the GDS ratio is calculated by dividing the annual housing expenses by the annual income. So, $14,400 (housing expenses) / $45,000 (annual income) = 0.32 or 32%. Therefore, the correct answer is B - 32%.

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