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 significant difference between the GDS and the TDS ratio?

The TDS ratio is typically lower than the GDS ratio.
The GDS ratio takes personal debts into consideration.
The TDS ratio does not normally include an individual's credit card debt.
The TDS takes personal debts into consideration.
The GDS ratio includes only housing-related costs.
The GDS ratio does not take into account additional debts.

The correct answer is: The TDS takes personal debts into consideration.

The significant difference between the GDS (Gross Debt Service) and the TDS (Total Debt Service) ratio lies in the fact that the TDS ratio takes personal debts into consideration. This means that when calculating the TDS ratio, not only the housing-related costs are factored in, but all personal debts such as car loans, credit card debt, and other financial obligations are also included. This is crucial for lenders as it provides a more comprehensive picture of an individual's financial situation and ability to manage additional debt along with housing costs. On the other hand, the GDS ratio focuses solely on housing-related costs, such as mortgage payments, property taxes, heating costs, and 50% of condo fees (if applicable), providing a more focused view on the affordability of housing for the borrower.