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The two debt ratios every Canadian mortgage applicant needs to understand.
When you apply for a mortgage in Canada, lenders use two critical debt service ratios to decide how much they'll lend you. Understanding GDS and TDS — and how they're calculated — helps you predict your maximum mortgage and take steps to improve your position before applying.
GDS stands for Gross Debt Service ratio. It measures your housing costs as a percentage of your gross (pre-tax) monthly income.
The GDS ratio only looks at housing-related expenses — it excludes other debts like car loans or student loans.
TDS stands for Total Debt Service ratio. It includes all housing costs plus all other monthly debt obligations.
| Mortgage Type | Max GDS | Max TDS |
|---|---|---|
| Insured (CMHC — less than 20% down) | 39% | 44% |
| Conventional (20%+ down, federally regulated) | 35% | 42% |
These limits apply when using the stress test qualifying rate (contract rate + 2%, minimum 5.25%) — not your actual contract rate.
Assume: $120,000 gross income, 4.89% contract rate (6.89% qualifying), $450/month taxes + heating, 25-year amortization, $450,000 mortgage.
Same applicant, plus $600/month car loan and $200/month credit card minimum.
| Item | Included in GDS? | Included in TDS? |
|---|---|---|
| Mortgage principal + interest | Yes | Yes |
| Property taxes | Yes | Yes |
| Heating costs | Yes | Yes |
| Condo fees (50%) | Yes | Yes |
| Car loan payments | No | Yes |
| Student loan payments | No | Yes |
| Credit card minimums | No | Yes |
| Personal loan payments | No | Yes |
| Child support / alimony | No | Yes |
If you haven't provided actual utility bills, most lenders use a standard heating cost assumption of $100–$175/month depending on the property type and province. This is a relatively small number but it still affects your GDS ratio.
CMHC-insured mortgages (less than 20% down) are backed by the federal government. Because the insurance protects the lender against default, lenders are permitted to use slightly more flexible GDS/TDS limits (39%/44% vs. 35%/42%). The borrower pays the insurance premium.
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