GDS and TDS Ratio in Canada 2025: What They Mean for Your Mortgage

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.

What Is the GDS Ratio?

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.

What Is the TDS Ratio?

TDS stands for Total Debt Service ratio. It includes all housing costs plus all other monthly debt obligations.

2025 GDS and TDS Limits

These limits apply when using the stress test qualifying rate (contract rate + 2%, minimum 5.25%) — not your actual contract rate.

How GDS and TDS Are Actually Calculated

Step-by-Step GDS Example

Assume: $120,000 gross income, 4.89% contract rate (6.89% qualifying), $450/month taxes + heating, 25-year amortization, $450,000 mortgage.

• Monthly mortgage payment at 6.89% on $450,000 = ~$3,150
• Property tax + heating = $450
• GDS = ($3,150 + $450) ÷ $100 × 100 = 36% ✅ (under 39%)

Step-by-Step TDS Example

Same applicant, plus $600/month car loan and $200/month credit card minimum.

• TDS = ($3,150 + $450 + $600 + $200) ÷ $100 × 100 = 44% ✅ (at the limit)

What Counts in Each Ratio

How Lenders Estimate Heating Costs

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.

Why Insured Mortgages Get Higher Limits

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.

How to Improve Your GDS and TDS

• Reduce consumer debt: Every $100 eliminated in monthly debt payments improves TDS by ~1% for a $120,000 income earner.
• Increase income: Bonus income, rental income, or side income that can be documented and verified helps both ratios.
• Longer amortization: 30 years reduces monthly payment, improving both GDS and TDS.
• Add a co-borrower: Combining incomes raises the denominator in both ratios.
• Lower purchase price: Targeting a smaller mortgage keeps ratios comfortably below limits.