May 7, 2025
If you’re planning to buy your first home, one of the first things a lender will look at is whether you can afford the mortgage payments. To figure this out, they use two important numbers: GDS and TDS. These are short for Gross Debt Service and Total Debt Service, and they help lenders decide if you’re financially ready to take on a mortgage.
Gross Debt Service (GDS) looks at how much of your income would go toward the basic costs of owning a home. This includes your mortgage payments (the loan and interest), your property taxes, your heating costs, and if you’re buying a condo, half of the condo fees. The lender adds up all these costs and compares them to your gross income — that’s your income before taxes or deductions. The result is a percentage. For example, if you earn $6,000 a month and your monthly housing costs are $2,000, your GDS would be 33%. That’s a healthy number. For most insured mortgages in Canada — where the down payment is less than 20% — your GDS must be under 39%.
Total Debt Service (TDS) takes it a step further. It includes everything from GDS, but also adds in your other monthly debt payments — things like credit card bills, car loans, student loans, or lines of credit. The lender wants to see if you can handle your housing costs plus all your other debts together. So, using the same example, if your housing costs are $2,000 and you also pay $500 each month toward other debts, your total monthly payments would be $2,500. Divide that by your $6,000 income, and your TDS would be about 41.6%. That would be within the limit, since the maximum TDS allowed for an insured mortgage is 44%.
Understanding these two ratios is important because they help you know what price range of home you can realistically afford. If your numbers are too high, you may need to look at a less expensive home, pay down some debt, or consider increasing your down payment. Lenders use GDS and TDS to help protect you from getting into a mortgage that’s too big for your budget.
Source: Absolute Mortgage Team