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?
Correct Answer
C) $2,133
The GDS ratio calculates the maximum housing costs as a percentage of gross monthly income. With $80,000 annual income ($6,667 monthly), 32% GDS allows for maximum housing payments of $2,133 ($6,667 × 0.32). The existing debt payments don't affect the GDS calculation, only the Total Debt Service (TDS) ratio.
Why This Is the Correct Answer
Option C ($2,133) is correct because it properly applies the 32% GDS ratio calculation. With a gross annual income of $80,000, the monthly gross income is $6,667 ($80,000 ÷ 12). The maximum housing payment under a 32% GDS ratio is calculated as $6,667 × 0.32 = $2,133. The existing monthly debt payments of $600 are irrelevant to the GDS calculation, which only considers housing costs as a percentage of gross income. This aligns with standard Canadian lending practices where GDS and TDS are calculated separately.
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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?
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A client has a gross annual income of $80,000 and other monthly debt payments of $600. Using CMHC's maximum Gross Debt Service (GDS) ratio of 39%, what is the most the client can spend on monthly housing costs?