GDS and TDS Calculations

Total Debt Service

Learn how mortgage lenders calculate your debt service ratios, GDS and TDS. You need to know these two basic calculations so you can crunch the numbers to find out what your budget and affordability are.

Gross Debt Service (GDS) 

Lending guidelines allow you to use up to 32% of your gross monthly income towards housing costs, which includes the mortgage payment, taxes and heating costs. If you purchase a condominium, add half of the monthly condo fee.

Total Debt Service (TDS)

For a more comprehensive estimate of what you can afford, no more than 42% of your gross monthly income can be used for housing costs and other debts. These include car payments, credit cards and any other payments on your credit bureau.

Let’s give you the numbers…

Mortgage Payment: Includes principal and interest, based on the amortization period and mortgage amount, including the default insurance premium. Mortgage payments are “stress-tested” to ensure you can comfortably afford the payment in a rising rate environment. Insured mortgages are required to qualify using the Bank of Canada’s conventional mortgage – 5-year rate. Uninsured mortgages are required to qualify at the greater of the conventional mortgage – 5-year rate or the contractual mortgage rate plus 2 percent.

Property Taxes: Include the monthly property tax amount as shown on the MLS listing or calculate using the town/city mill rate.

Condo Fees and Lot Rent: If applicable, add 50% of the monthly condominium fees. For chattel or leasehold loans, include 100% of the site rent.

Heat Costs: The costs used must be a reasonable estimate taking into consideration factors such as property size, location and/or type of heating system. 

Revolving Debt Obligations: Includes revolving credit (i.e. credit card debts, lines of credit.) For unsecured lines of credit and credit cards, factor in a 3% monthly payment of the outstanding balance. 

Non-revolving Debt Obligations: These include personal loans, student loans and car loans. Factor in the monthly payment. To calculate bi-weekly payments, take the payment amount x 26 divided by 12 months. 

Let’s do the calculations…

Determining a GDS and TDS ratio involves adding up monthly debt obligations and dividing them by your gross monthly income (expressed as a percentage.) 

For example, Tom and Jane want to buy a house. Their combined annual salary is $82,000, which makes their gross monthly income $6,833. They estimate that their “stress-tested” mortgage payment and property taxes will be $2,250, heat will be $75, and their monthly credit card payments are $250 (3% of the balances), with a $375 car loan payment.

(monthly “stress-tested” mortgage payment, property taxes & heat) / (monthly income) = GDS (x100)

$2,325 / $6,833 = 0.34 x 100 = 34%

(monthly “stress-tested” mortgage payment, property taxes, heat, credit card payments & loan payment) / (monthly income) = TDS (x100)

$2,950 / $6,833 = 0.43 x 100 = 43%

While the guidelines state your GDS can’t exceed 32% and your TDS should be no more than 40%, most borrowers with good credit and a reliable income can exceed these guidelines. As a result, the maximum GDS is 39%, and the maximum TDS is 44%.

By calculating your GDS and TDS, you will be able to narrow down your budget and affordability. Knowing what your numbers are will bring you one step closer to buying your dream home. See what mortgage amount you can qualify for by downloading my free mortgage app today.


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