Understanding GDS and TDS Ratios

Key metrics lenders use to assess your mortgage affordability

What Are Debt Service Ratios?

Debt service ratios are calculations that lenders use to determine how much mortgage debt you can reasonably afford based on your income. In Canada, there are two primary ratios that lenders evaluate:

  • GDS (Gross Debt Service) Ratio - Housing costs only
  • TDS (Total Debt Service) Ratio - All debt obligations

These ratios help ensure you won't become over-extended financially and can comfortably manage your mortgage payments along with your other financial obligations.

GDS Ratio (Gross Debt Service)

GDS = (Housing Costs ÷ Gross Income) × 100

What's Included in Housing Costs?

  • Monthly mortgage payment (principal and interest)
  • Property taxes (monthly portion)
  • Heating costs
  • 50% of condo fees (if applicable)

GDS Guidelines

CMHC-insured maximum: 39%

Lenders may use stricter internal limits depending on the mortgage, borrower profile, and insurer requirements. Lower ratios generally provide more room in your budget.

GDS Calculation Example

Gross Monthly Income: $6,000

Housing Costs:

  • Mortgage payment: $1,500
  • Property taxes: $250
  • Heating: $100
  • Condo fees (50%): $150
  • Total: $2,000

GDS Ratio: ($2,000 ÷ $6,000) × 100 = 33.3%

TDS Ratio (Total Debt Service)

TDS = (Housing Costs + Other Debts ÷ Gross Income) × 100

What's Included in Total Debts?

  • All housing costs (from GDS calculation)
  • Credit card payments (minimum monthly payment)
  • Car loans or leases
  • Student loans
  • Personal loans or lines of credit
  • Other debt obligations

TDS Guidelines

CMHC-insured maximum: 44%

Lenders may use stricter internal limits depending on the mortgage, borrower profile, and insurer requirements.

TDS Calculation Example

Gross Monthly Income: $6,000

Total Debt Obligations:

  • Housing costs: $2,000
  • Car loan: $400
  • Credit card minimum: $100
  • Student loan: $200
  • Total: $2,700

TDS Ratio: ($2,700 ÷ $6,000) × 100 = 45%

⚠️ This ratio exceeds recommended guidelines

Why These Ratios Matter

For Lenders

  • Assess your ability to repay the mortgage
  • Determine maximum loan amount
  • Evaluate financial stability
  • Comply with lending regulations

For You

  • Understand your true affordability
  • Avoid over-extending financially
  • Plan for comfortable payments
  • Leave room for savings and emergencies

How to Improve Your Ratios

💰 Increase Your Income

  • Include all sources of income
  • Add a co-borrower
  • Consider bonus/commission income
  • Document rental income

📉 Pay Down Debt

  • Pay off credit cards
  • Eliminate car loans early
  • Consolidate high-interest debt
  • Ask the lender how revolving-credit limits and payments are treated before changing accounts solely for qualification

🏠 Adjust Housing Budget

  • Look at lower-priced homes
  • Make a larger down payment
  • Consider a longer amortization
  • Shop for lower property taxes

⏰ Time Your Purchase

  • Wait until debts are paid off
  • Delay until income increases
  • Build up your down payment
  • Review your credit report and correct errors before applying

Important Considerations

🏦 Different Lenders, Different Rules

The 39% GDS and 44% TDS limits are widely used for CMHC-insured qualification, but lender underwriting can still vary:

  • Traditional Banks: Usually strict with standard ratios
  • Credit unions: Regulatory and underwriting requirements can differ by institution and province
  • Other lenders: Underwriting, rates, fees and acceptable ratios can differ; compare total cost and terms
  • Insured vs. Uninsured: Insured mortgages may have stricter requirements

📊 Stress Test Impact

Your ratios are calculated using the stress test rate (the higher of your contract rate + 2% or 5.25%), not your actual mortgage rate. This means you're qualified based on a higher payment than you'll actually make, providing a safety cushion.

💡 Beyond the Numbers

Even if you qualify for a certain amount, consider your lifestyle and financial goals:

  • Do you want room in your budget for vacations and entertainment?
  • Are you planning to have children or other major life changes?
  • Do you have emergency savings beyond your down payment?
  • Are your job and income stable and secure?

Ready to Calculate Your Ratios?

Use our mortgage calculator to see how different scenarios affect your GDS and TDS ratios, or contact us for a personalized assessment.

Affordability Calculator

Last reviewed: September 2026

Disclaimer: This guide provides general information about debt service ratios for educational purposes only. Actual lending requirements vary by institution and your individual circumstances. Always consult with a licensed mortgage professional for personalized advice.

Frequently Asked Questions

What is the GDS ratio for a mortgage in Canada? +
The Gross Debt Service (GDS) ratio is the percentage of your gross monthly income needed to cover your housing costs — including your mortgage payment (principal and interest), property taxes, heating costs, and 50% of condo fees if applicable. For CMHC-insured qualification, the standard maximum GDS ratio is 39%. Individual lenders can apply additional underwriting criteria, so a lower ratio may still strengthen an application.
What is the TDS ratio and how is it different from GDS? +
The Total Debt Service (TDS) ratio measures all your monthly debt obligations as a percentage of gross income — your housing costs (same as GDS) plus all other debts such as car loans, credit card minimum payments, student loans, and personal lines of credit. For CMHC-insured qualification, the standard maximum TDS ratio is 44%; lender and insurer underwriting can differ. GDS only looks at housing; TDS looks at everything.
What GDS and TDS ratios do I need to get approved for a mortgage in Canada? +
For CMHC-insured qualification, the standard maximum ratios are 39% GDS and 44% TDS. Lenders may apply stricter internal underwriting depending on the mortgage and borrower. Where the federal mortgage stress test applies, qualification uses the applicable qualifying rate rather than simply the contract payment.
What happens if my TDS ratio is too high? +
A TDS above the limit used for a particular mortgage can reduce the amount you qualify to borrow or make that application ineligible. Possible ways to change the calculation include reducing monthly debt obligations, lowering the target mortgage amount, adding eligible co-borrower income, or increasing the down payment. Exact underwriting depends on the lender and mortgage-insurance rules.
Does the mortgage stress test affect my GDS and TDS ratios? +
Where the federal mortgage stress test applies, the qualifying payment is calculated using the applicable qualifying rate rather than simply the contract rate. For example, a 4.59% contract rate is tested at 6.59% when that is higher than the 5.25% floor. The effect on GDS/TDS and borrowing capacity depends on all of the inputs.
Can rental income be used to improve my GDS and TDS ratios? +
Rental-income treatment is lender-, insurer- and property-specific. A lender may use a portion of eligible rental income or a rental-offset method and will require acceptable documentation. Ask the lender how the particular property and rental income will be treated before relying on it for qualification.