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?
Correct Answer
A) $2,600
Gross monthly income is $80,000 ÷ 12 = $6,667. The GDS ratio counts only housing costs (principal, interest, property taxes, heating, and half of any condo fees), so the maximum is $6,667 × 39% = $2,600. The $600 of other debt matters for the TDS ratio, not the GDS ratio.
Why This Is the Correct Answer
GDS = housing costs ÷ gross income. At CMHC's 39% limit, $6,666.67 × 0.39 = $2,600 of monthly housing costs. Other debts are ignored for GDS.
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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?
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