Is default insurance premium included in the GDS calculation if it is present?

The inclusion of the default insurance premium in the Gross Debt Service (GDS) calculation is indeed correct. When calculating GDS, all housing-related costs need to be accounted for. This includes the principal and interest of the mortgage, property taxes, heating costs, and any default insurance premiums that may be applicable.

Default insurance, also known as mortgage default insurance, is typically required by lenders when a homebuyer makes a down payment that is less than 20% of the purchase price. This insurance protects the lender in the event of a default on the mortgage. Since this premium is a recurring cost associated with the mortgage, it directly impacts the borrower’s ability to meet their debt obligations.

By including the default insurance premium in GDS calculations, lenders can evaluate a borrower's financial situation more accurately, thereby ensuring that the borrower does not exceed the recommended debt service ratios. Thus, the answer affirmatively aligns with standard mortgage qualification practices in Canada.