A client has a gross monthly income of $8,000 and other monthly debt payments of $800. Under CMHC's homeowner mortgage insurance requirements, what is the maximum monthly housing cost allowed by the Gross Debt Service (GDS) ratio?
Correct Answer
B) $3,120
CMHC caps the GDS ratio at 39% of gross household income. Housing costs (principal, interest, property taxes, heating and half of any condo fees) may therefore reach $8,000 × 39% = $3,120 a month. The $800 of other debt is tested under the 44% TDS ratio, not GDS.
Why This Is the Correct Answer
The GDS limit is 39% of gross income: $8,000 × 0.39 = $3,120 of monthly housing costs. Other debts are excluded from GDS.
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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?
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