Debt Service Ratios
Understand debt service ratios in Canadian real estate — how GDS and TDS work, their thresholds, and how lenders use them to approve mortgages.
May 22, 2025
What are Debt Service Ratios?
Debt service ratios are financial metrics used by lenders to assess a borrower’s ability to manage mortgage payments in relation to their income.
Why Do Debt Service Ratios Matter in Real Estate?
In Canadian real estate, two primary ratios are used:
1. Gross Debt Service (GDS) Ratio:- Measures housing costs vs. gross income
- Includes mortgage, property taxes, heating, and 50% of condo fees
- Generally must be under 39%
- Measures all debt obligations vs. gross income
- Includes GDS plus other debts like car loans and credit cards
- Generally must be under 44%
Lenders use these ratios to determine mortgage eligibility. Staying within these limits ensures that homeowners can afford their housing without becoming financially overextended.
Understanding debt service ratios helps buyers prepare for pre-approval, understand loan limits, and evaluate financial readiness.
Example of Debt Service Ratios in Action
A buyer with $6,000 monthly income and $2,100 in housing costs has a GDS of 35%. Including $500 in other debts, their TDS is 43%—within lender guidelines.
Key Takeaways
- Used to evaluate mortgage affordability.
- GDS focuses on housing costs; TDS includes all debts.
- Lenders require ratios within specific limits.
- Helps determine mortgage approval.
- Essential part of financial readiness.
Related Terms
- GDS
- TDS
- Mortgage Qualification
- Pre-Approval
- Lender Guidelines
Average and median describe different aspects of the same month’s transactions. Both are affected by the mix of homes sold.
Category averages compare different homes and locations; the gaps are not estimates of the cost to upgrade an otherwise identical property.
The five categories shown account for 5,000 of the board’s 5,057 sales. The remaining 57 transactions were in other housing categories.
Monthly observations are not seasonally adjusted. Active listings count properties available at month-end; they are not construction inventory.
Average and median prices share one dollar axis. These unadjusted transaction measures do not control for changes in the homes sold.
TRREB’s 416/905 categories compare the apartments sold in each area. The difference does not isolate a location premium for equivalent units.
Highlights from the Delta Golf & Country Club listing brochure. (Colliers)
5680 Oak Street in Vancouver and its surrounding context. (MCMP Architects)
Ground-level renderings of the tower proposed for 5680 Oak Street in Vancouver. (MCMP Architects)
