📖 GDS and TDS ratios, explained with real numbers

The two ratios that decide your approval

Before a Canadian lender looks at your credit score, your job, or the house itself, your application is run through two arithmetic tests. GDS — Gross Debt Service — asks what share of your gross monthly income would go to housing: mortgage payment, property tax, heating, and half of any condo fees. The standard ceiling is 39%. TDS — Total Debt Service — asks the bigger question: housing plus every other debt payment — car loans and leases, credit card minimums, student loans, lines of credit — against the ceiling of 44%. Exceed either limit and the application fails or shrinks, no matter how good the rest of the file looks. (Insurers and lenders vary: some use tighter 35%/42% limits for weaker files, and the ratios here are the standard insured-mortgage guidelines this site's calculators apply.) Both ratios are calculated not at your actual mortgage rate but at the stress-test qualifying rate — the higher of 5.25% or your contract rate + 2% — which is why the approved payment in these tests is always higher than the payment you will actually make.

Worked example: $100,000 income, the calculator's own case

Run the exact case the affordability calculator opens with: gross income $100,000 ($8,333 a month), $50,000 down, a 4.49% rate, property tax of $350 a month, heating of $120, no condo fees, and $250 a month of other debts. The qualifying rate is 6.49%. GDS first: 39% of $8,333 is $3,250; subtract tax and heat ($470) and the most mortgage payment the GDS test allows is $2,780 a month. TDS: 44% of $8,333 is $3,667; subtract the same $470 and the $250 of debts and the TDS ceiling is $2,947. The lower number governs — GDS — and a $2,780 qualifying payment at 6.49% over 25 years supports a $415,410 mortgage. Add the down payment: a maximum price of $465,410. Note the gap that confuses everyone: at the real 4.49% rate, the actual payment on that mortgage (with the CMHC premium folded in) is about $2,368 a month. The lender is not testing whether you can pay $2,368. It is testing whether you could pay $2,866 — the payment at the qualifying rate — and still stay inside the ratios.

How debts quietly delete houses

Because TDS counts debts dollar-for-dollar against the same income, non-mortgage debt is brutally expensive in house terms. Raise the example's other debts from $250 to $600 a month and TDS becomes the binding limit: the maximum price falls from $465,410 to $438,015. That extra $350 a month of car and card payments deleted about $27,000 of house. The flip side is just as striking: at the 6.49% qualifying rate, every $100 a month of payment room is worth roughly $14,900 of mortgage — so clearing a $300 car payment before you apply can add about $45,000 of approval, often more than the same money added to the down payment. Two warnings. First, lenders typically count credit cards at around 3% of the outstanding balance, not the minimum payment printed on your statement — a $10,000 balance can count as $300 a month. Second, the ratios hide a trap in the other direction: in the original example, paying the $250 debt off entirely does not raise the approval, because GDS was already the binding limit. Which ratio binds for you — the stress test calculator shows both, explicitly — determines whether debt payoff, a bigger down payment, or a lower price is the lever that actually moves your number.

The ratios are the gate, not the whole decision

Passing GDS and TDS at the qualifying rate makes you eligible; it does not make you approved. Lenders and insurers then weigh the things ratios cannot see: credit history and score (a thin file can face tighter 35%/42% ratio limits), employment stability and income type (self-employment and commission income are documented differently and sometimes averaged over two years), and the property itself — its type, location, and marketability. The order matters for strategy: because the ratios are mechanical, they are the part you can compute exactly, in advance, for free — which is what the calculators on this page do. The judgement parts of the file are where a broker earns their fee, by matching the file to the lender whose guidelines fit it. One more mechanical point: for uninsured mortgages (20%+ down), lenders still calculate these same ratios and the stress test still applies; the process is somewhat more flexible for strong files, but "I have 20% down so ratios do not matter" is a myth that costs buyers their deposits. Budget to the ratios either way.

Condo fees and the 50% rule

One line surprises condo buyers: only half of the monthly condo fee counts in GDS (the reasoning being that part of the fee covers heat and utilities counted elsewhere). Even halved, fees bite: add $400-a-month condo fees to the example — $200 counted — and the maximum price drops from $465,410 to about $435,525, because every dollar of counted housing cost displaces a dollar of mortgage payment, and each payment dollar carries roughly $149 of mortgage at the qualifying rate. When you compare a condo against a freehold at the same price, the ratios do not see them as the same purchase at all. The takeaway for all of this: approval is a formula with four or five inputs you can actually change — debts, down payment, price, amortization, and (for condos) the fee — and the companion calculators exist so you can pull each lever and watch the ratios respond before a lender does it for you.