GDS focuses on housing costs
For mortgage qualification, gross debt service generally includes the proposed mortgage payment, property taxes, heating costs and 50% of condominium fees where applicable, divided by gross household income. Use the lender’s required amounts and frequency rather than a rough online estimate.
Gross income is before tax. That makes GDS useful for standardized qualification, but it can overstate the cash actually available to a household with large payroll deductions or essential costs not included in the formula.
TDS adds required debt payments
Total debt service uses the housing costs from GDS and adds other required debt payments, such as credit cards, car loans and lines of credit. The result is divided by gross income. Ask the lender what payment it assigns to revolving accounts and how co-signed or jointly held debts are treated.
FCAC describes common mortgage guidelines of no more than 39% GDS and 44% TDS. These are not a universal promise of approval. Credit history, down payment, property, stress-test rules and lender policy also matter.
A worked example shows what the ratios leave out
Hypothetical household gross income is $9,000 per month. Proposed housing costs used for GDS total $3,150, producing a GDS of 35%. Other debt payments total $630, so TDS is $3,780 divided by $9,000, or 42%. The example falls below the common guidelines described by FCAC.
That result does not show income tax, food, childcare, transport beyond debt payments, insurance, maintenance or savings. Build a separate after-tax cash-flow budget before deciding that a mortgage or consolidation payment is affordable.
| Item | Monthly amount | Included in |
|---|---|---|
| Gross household income | $9,000 | Denominator for both |
| Housing costs | $3,150 | GDS and TDS |
| Other debt payments | $630 | TDS only |
| GDS | 35% | $3,150 ÷ $9,000 |
| TDS | 42% | $3,780 ÷ $9,000 |
Improve the inputs without gaming the calculation
Paying down revolving balances, reducing required payments or choosing a less expensive property can lower the ratio. Moving debt can change the required payment without necessarily reducing the balance or total cost. Do not choose a longer or secured loan solely to make the ratio look smaller.
If debt consolidation is part of the mortgage plan, model the balance after closing and the risk of new charges. Qualification answers whether a lender may approve the application; affordability asks whether the household can live with the payment through rate changes and ordinary expenses.
Prepare for a conversation
- Gross monthly household income
- Mortgage payment, taxes, heating and applicable condo fees
- Required payments on every other debt
- A separate after-tax household budget
You do not need account numbers, a SIN, banking credentials or uploaded documents to start our enquiry.
Does a TDS below 44% guarantee mortgage approval?
No. The figures are common guidelines described by FCAC, not an approval promise. Lenders also consider credit, the property, down payment, interest-rate qualification and their own policies.
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