Humber/Ontario Real Estate Course 3 Exam Practice

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If a buyer earns $45,000 annually and pays $1,200 monthly for their mortgage and property taxes, what is the Gross Debt Service (GDS) ratio?

  1. 27%

  2. 32%

  3. 31%

  4. 35%

  5. 28%

  6. 34%

The correct answer is: 32%

The Gross Debt Service (GDS) ratio is calculated by dividing the total annual mortgage payments (including principal, interest, property taxes, and heating costs) by the buyer's gross annual income. In this case, the buyer pays $1,200 monthly, which totals $14,400 annually for their mortgage and property taxes. To find the GDS ratio, we divide the annual mortgage and property tax payments ($14,400) by the buyer's annual income ($45,000): $14,400 / $45,000 = 0.32 Converting this to a percentage gives us 32%. Therefore, the correct answer is B - 32%. The other options are incorrect as they do not result from the correct calculation of dividing the annual mortgage and property tax payments by the buyer's gross annual income.

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