GDS and TDS: The Two Ratios That Actually Decide What You Can Borrow

What GDS and TDS actually are

Every mortgage application runs through two calculations before a lender says yes: Gross Debt Service (GDS) and Total Debt Service (TDS). Both compare a slice of your monthly obligations against your gross annual income, and both are published, defined calculations — not a lender's gut feeling about whether you look like a safe bet.

Canada Mortgage and Housing Corporation, which insures a large share of Canadian mortgages and publishes the formulas most lenders build their own underwriting around, defines GDS as principal, interest, property taxes and heat, divided by gross annual income. TDS takes that same numerator and adds every other debt obligation you carry — credit cards, car loans, student loans, lines of credit — before dividing by the same income figure.

CMHC caps GDS at 39% and TDS at 44% for the mortgages it insures. In plain terms: your housing costs alone can't eat more than 39 cents of every gross dollar you earn, and your housing costs plus every other debt payment together can't exceed 44 cents. Individual lenders can and do apply their own limits on uninsured mortgages, and those vary — but CMHC's published maximums are the reference point most of the industry works from.

What actually counts toward each number

The housing-cost side of both ratios (the “GDS” portion) is more specific than most people expect. According to CMHC's own published guidance, it includes:

• Your mortgage principal and interest payment, calculated using the loan amount, amortization and your applicable qualifying benchmark
• Property taxes, based on the actual bill or a reasonable estimate for the property
• Heat, based on actual records where available or a reasonable estimate tied to the property's characteristics
• 50% of condo fees, where applicable — CMHC's guidance specifically calls for half the fee, not the full amount

TDS adds everything else you owe money on every month. CMHC's guidance specifies a minimum monthly payment of 3% of the outstanding balance for credit cards and revolving credit, the actual payment for personal and car loans, and — for a secured line of credit — a calculated payment based on amortizing the full outstanding balance over 25 years at the contract or benchmark pricing, whichever applies. That last one catches people off guard: a line of credit sitting mostly unused can still add a meaningful monthly obligation to your TDS calculation, because the math assumes you could draw the whole thing down and have to pay it back.

Why this is worth understanding before you shop

Two buyers with identical household income can qualify for meaningfully different mortgage amounts once TDS is in the picture, and the gap usually comes down to debt they're carrying that has nothing to do with housing. A car loan payment or a large revolving credit balance reduces the room left for a mortgage payment inside that 44% ceiling — sometimes by tens of thousands of dollars in purchasing power, depending on the balance and the term.

This is also why paying down a car loan or a credit card balance before applying can move the needle on what you qualify for more than a small change in income would. The GDS side is largely fixed by the property you're buying and your income; the TDS side is the part you actually have some control over heading into an application.

There are exceptions worth knowing about, too. CMHC's guidance allows up to 100% of gross rental income from a secondary suite to be included for an owner-occupied two-unit property, and net rental income can be included for a dedicated investment property — both of which work in the opposite direction, adding to the income side rather than the debt side of the calculation.

How to actually use this before you shop

Running your own numbers through a pre-qualification tool before you start touring properties tells you what a lender will actually see — not a rough guess based on a multiple of your income, which is how a lot of buyers estimate their own budget and end up disappointed. Our pre-qualification tool and affordability calculator both walk through GDS and TDS the same way a lender's underwriting does, using the qualifying assumptions confirmed on this site's own tools.

If you're carrying debt you could reasonably pay down before applying — a car loan close to being paid off, a credit card balance you could clear — doing that first, and then getting pre-qualified, gives you a truer picture of what you can actually afford than applying with the debt still on the books.