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Debt Service Ratios – GDS and TDS Combined

Understand GDS and TDS debt service ratios in Canadian real estate, how they impact mortgage approval, and how to stay within limits to qualify.

Debt Service Ratios – GDS and TDS Combined

May 22, 2025


What are Debt Service Ratios?

Debt service ratios, including Gross Debt Service (GDS) and Total Debt Service (TDS), are financial metrics used by lenders to assess a borrower's ability to manage housing costs and overall debt.

Why Debt Service Ratios Matter in Real Estate

In Canadian real estate, GDS and TDS ratios help lenders evaluate mortgage affordability.

- GDS measures housing-related expenses (mortgage, property taxes, heating, and 50% of condo fees) as a percentage of gross income. The maximum allowable GDS is typically 32%.
- TDS includes all debt payments (housing expenses plus loans, credit cards, etc.). The TDS threshold is generally 40–44%.

Lenders calculate these ratios during the mortgage approval process. Staying within the approved limits ensures borrowers can manage their monthly obligations without financial strain.

For example, if your gross monthly income is $6,000, your GDS should not exceed $1,920, and your TDS should stay below $2,640–$2,800.

High GDS or TDS ratios may result in mortgage denial or limit the amount you can borrow. Buyers with strong credit or larger down payments may have more flexibility.

Understanding and managing your debt service ratios is essential to qualify for financing and maintain financial health as a homeowner.

Example of Debt Service Ratios in Action

A buyer with $6,000 monthly income keeps housing costs at $1,800 (30%) and total debt at $2,400 (40%), staying within lender thresholds for GDS and TDS.

Key Takeaways

  • GDS and TDS assess mortgage affordability.
  • GDS focuses on housing costs; TDS includes all debts.
  • Key thresholds: GDS ≤ 32%, TDS ≤ 40–44%.
  • Helps ensure borrowers don’t overextend.
  • Crucial for mortgage approval and financial planning.

Related Terms

  • Mortgage Qualification
  • GDS
  • TDS
  • Affordability
  • Budgeting

Additional Terms

Rent Control

Rent control refers to government regulations that limit how much landlords can increase rent for residential tenants each year.. more

Receivership

Receivership is a legal process where a court or secured creditor appoints a receiver to take control of a borrower’s assets, such as property or. more

REALTOR

A REALTOR is a licensed real estate professional who is a member of the Canadian Real Estate Association (CREA) and adheres to its Code of Ethics and. more

Property Use History

Property use history refers to the documented past uses, functions, and occupancy of a property, which may affect environmental risk, zoning, or. more

Property Management

Property management is the oversight and administration of real estate assets on behalf of the owner, covering leasing, maintenance, financial. more

Property Maintenance

Property maintenance refers to the ongoing upkeep, repair, and management of a building or land to preserve its safety, functionality, and appearance.. more

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