BC Real Estate Trading Services Course Financing & Mortgages 3

Question 1

In BC, the 'Gross Debt Service' (GDS) ratio measures:

Accepted Answer

Monthly housing costs (mortgage P&I, property taxes, heating) as a percentage of gross monthly income

Answer

GDS ratio = (Mortgage P&I + Property Taxes + Heating + 50% strata fees) ÷ Gross Monthly Income. Canadian lenders typically require GDS to be 39% or less.

Question 2

In BC, the maximum Total Debt Service (TDS) ratio typically allowed by major lenders is:

Accepted Answer

44%

Answer

Canadian lenders typically require the TDS ratio (all monthly debt obligations including housing costs) to be 44% or less of gross monthly income for insured mortgages.

Question 3

In BC, an 'open mortgage' differs from a 'closed mortgage' in that:

Accepted Answer

Open mortgages can be prepaid in full at any time without penalty

Answer

An open mortgage can be prepaid partially or in full at any time without prepayment penalty. Closed mortgages restrict prepayment but typically offer lower interest rates in exchange.

Question 4

In BC, a 'vendor take-back mortgage' (VTB) is one where:

Accepted Answer

The seller provides financing to the buyer as part of the purchase transaction

Answer

A vendor take-back mortgage is seller financing: the seller 'takes back' a mortgage from the buyer instead of receiving the full purchase price in cash. The buyer makes payments to the seller.

Question 5

In BC, 'mortgage portability' allows a borrower to:

Accepted Answer

Transfer an existing mortgage to a new property, keeping the current rate and terms

Answer

Mortgage portability allows a borrower to transfer their existing mortgage (rate, terms, balance) from one property to a new property when they move, avoiding prepayment penalties.

BC Real Estate Practice Test

BC Real Estate Practice Test

BC Real Estate Trading Services Course Financing & Mortgages 3