A prospective borrower has a gross annual income of $90,000, property taxes of $4,800 annually, and heating costs estimated at $2,400 annually. They are seeking a mortgage with a principal and interest payment of $2,100 per month. Their existing debt obligations include a car loan payment of $450 per month and a credit card minimum payment of $120 per month. Assuming the qualifying rate is 5.25% and an amortization period of 25 years, what is the impact on their eligibility based on Canadian mortgage underwriting standards, if their GDS limit is 32% and TDS limit is 40%?

Question: A prospective borrower has a gross annual income of $90,000, property taxes of $4,800 annually, and heating costs estimated at $2,400 annually. They are seeking a mortgage with a principal and interest payment of $2,100 per month. Their existing debt obligations include a car loan payment of $450 per month and a credit card minimum payment of $120 per month. Assuming the qualifying rate is 5.25% and an amortization period of 25 years, what is the impact on their eligibility based on Canadian mortgage underwriting standards, if their GDS limit is 32% and TDS limit is 40%?

Answer options:

• The borrower meets both GDS and TDS ratios comfortably and is eligible.
• The borrower exceeds the GDS ratio but is within the TDS ratio, making them ineligible. ✅ The borrower meets the GDS ratio but exceeds the TDS ratio, making them ineligible.
• The borrower exceeds both the GDS and TDS ratios, making them ineligible.

Correct answer: The borrower meets the GDS ratio but exceeds the TDS ratio, making them ineligible.

Explanation: To calculate GDS: (($2100 (P&I) * 12) + $4800 (Taxes) + $2400 (Heat)) / $90,000 (Gross Income) = 32%, which meets the 32% limit. To calculate TDS: (($210012) + $4800 + $2400 + ($45012) + ($120*12)) / $90,000 = 42%, which exceeds the 40% limit. Therefore, the borrower meets GDS but exceeds TDS, making them ineligible under typical conservative lending guidelines.