A client has a gross annual income of $80,000 and monthly debt payments of $500. Using a 32% gross debt service ratio, what is their maximum allowable monthly housing payment?
Correct Answer
C) $2,133
The gross debt service ratio of 32% means housing costs cannot exceed 32% of gross monthly income. Monthly gross income is $80,000 ÷ 12 = $6,667. Maximum housing payment is $6,667 × 0.32 = $2,133.
Why This Is the Correct Answer
Option C ($2,133) correctly applies the 32% gross debt service ratio calculation. The client's gross annual income of $80,000 divided by 12 months equals $6,667 monthly gross income. Multiplying this by the 32% GDS ratio limit ($6,667 × 0.32) gives exactly $2,133. This represents the maximum allowable monthly housing payment under standard Canadian lending guidelines, which typically cap housing costs at 32% of gross monthly income.
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A client has a gross annual income of $80,000 and monthly debt payments of $600. Using a 32% Gross Debt Service (GDS) ratio, what is the maximum monthly housing payment they can afford?