Humber/Ontario Real Estate Course 4 Exam Practice

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If a buyer's income is $85,000 and PIT payments amount to $23,750, what is the Gross Debt Service (GDS) ratio?

0.30%
32%
28%
3.57%

The correct answer is: 28%

The Gross Debt Service (GDS) ratio is a calculation used by lenders to determine the proportion of a buyer's income that goes towards housing costs. In this case, the GDS ratio is calculated by dividing the annual principal, interest, and property tax (PIT) payments ($23,750) by the buyer's income ($85,000) and then multiplying by 100 to get the percentage. Therefore, the GDS ratio in this scenario would be 28%, making choice C the correct answer. This means that 28% of the buyer's income is being used to cover housing expenses.