Humber/Ontario Real Estate Course 2 Exam Practice

Determine Buyer McNeil's Gross Debt Service (GDS) ratio if his yearly gross income is $75,000, making annual principal and interest payments of $22,000, and annual tax payments of $2,500.

1. 30.6%

2. 33%

3. 26%

4. 29.3%

The correct answer is: 33%

The Gross Debt Service (GDS) ratio is calculated by dividing the total annual housing costs by the gross annual income, then multiplying by 100 to get a percentage. In this case, the total annual housing costs are the sum of annual principal and interest payments plus annual tax payments, which equals $22,000 + $2,500 = $24,500. To find Buyer McNeil's GDS ratio, divide the total annual housing costs of $24,500 by his yearly gross income of $75,000, then multiply by 100: ($24,500 / $75,000) x 100 = 32.67% Therefore, Buyer McNeil's GDS ratio is 32.67%, which is closest to option B.