More Practice GDS & TDS Calculations

1. The Ghoris have three questions about financing the house they would like to buy:

a. How much is the gross debt service?b. How much is the total debt service?

Use the following information to answer the above questions.

Combined Incomes $120,000Property Taxes $4,000Heating costs $5,000 / yearMortgage $200,000Interest 6%Amortization Period 10 yearsMtg. Payments $1000/mth or $12,000 / yearConsumer debt $5,000 / yearLenders Maximum TDS 38%

a. How much is the gross debt service?

GDS = payments/yr +taxes/year + heating / year X 100Gross annual income

=$12,000+$4,000+5,000 X 100$120,000

=17.5%

b. How much is total debt service?

TDS= payments/yr +taxes + heating / year + consumers debt X 100Gross annual income

=$12,000+$4,000+5,000+ $5,000 X 100$120,000

=$26,000 X 100 $120,000=21.67%

2. How much will the GDS be for someone with the following income and expenses?

Gross annual income $80,000Mtg payments per year $ 8,000Property taxes per yr. $ 3,000Heating per year $ 4,000

=$8,000 +3,000 +4,000 X100 $80,000= 18.75%

3. How much will the above person’s TDS be if she has an outstanding credit card balance of $4,000 but no other debts?

=$8,000 +3,000 +4,000 + 4,000 X100 $80,000=23.75%

4. Answer true or false.a. Everyone can obtain a mortgage even without the money needed for a

down payment. False. A mortgagor must have a down payment although it may be as little as 5% for a CMHC mortgage.

b. Houses always appreciate in value. False. There is no guarantee that houses will appreciate in value.

c. Insured mortgages are only available from CMHC. False. Insured mortgage are approved by CMHC or by Genworth Financial Canada.

d. You will be charged a fee for taking out a high-ratio mortgage. True. While the application fee charged by CMHC has been cancelled there is still a premium of 1%-3.25% of the loan.