GDS/TDS Ratios Explained

Josh Perez • June 26, 2024

One of the major qualifiers lenders look at when considering your application for mortgage financing is your debt service ratios.


Now, before we get started, if you prefer to have someone walk through these calculations with you, assess your financial situation, and let you know exactly where you stand, let’s connect. There is no use in dusting off the calculator and running the numbers yourself when we can do it for you!


However, if you’re someone who likes to know the nitty-gritty of how things work instead of simply accepting that's just the way it is, this article is for you. But be warned, there are a lot of mortgage words and some math ahead; with that out of the way, let’s get started!

 

“Debt servicing” is the measure of your ability to meet all of your financial obligations. There are two ratios that lenders examine to determine whether you can debt service a mortgage.


The first is called the “gross debt service” ratio, or GDS, which is the percentage of your monthly household income that covers your housing costs. The second is called the “total debt service” ratio, or TDS, which is the percentage of your monthly household income covering your housing costs and all your other debts.


GDS is your income compared to the cost of financing the mortgage, including your proposed mortgage payments (principal and interest), property taxes, and heat (PITH), plus a percentage of your condo fees (if applicable).


Here’s how to calculate your GDS.


Principal + Interest + Taxes + Heat / Gross Annual Income


Your TDS is your income compared to your GDS plus the payments made to service any existing debts. Debts include car loans, line of credit, credit card payments, support payments, student loans, and anywhere else you’re contractually obligated to make payments.


Here’s how to calculate your TDS.


Principal + Interest + Taxes + Heat + Other Debts / Gross Annual Income


With the calculations for those ratios in place, the next step is to understand that each lender has guidelines that outline a maximum GDS/TDS. Exceeding these guidelines will result in your mortgage application being declined, so the lower your GDS/TDS, the better.


If you don’t have any outstanding debts, your GDS and TDS will be the same number. This is a good thing!


The maximum ratios vary for conventional mortgage financing based on the lender and mortgage product being offered. However, if your mortgage is high ratio and mortgage default insurance is required, the maximum GDS is 39% with a maximum TDS of 44%.


So how does this play out in real life? Well, let’s say you’re currently looking to purchase a property with a payment of $1700/mth (PITH), and your total annual household income is $90,000 ($7500/mth). The calculations would be $1700 divided by $7500, which equals 0.227, giving you a gross debt service ratio of 22.7%.


A point of clarity here. When calculating the principal and interest portion of the payment, the Government of Canada has instituted a stress test. It requires you to qualify using the government's qualifying rate (which is higher), not the actual contract rate. This is true for both fixed and variable rate mortgages.


Now let’s continue with the scenario. Let’s say that in addition to the payments required to service the property, you have a car payment of $300/mth, child support payments of $500/mth, and between your credit cards and line of credit, you’re responsible for another $700/mth. In total, you pay $1500/mth. So when you add in the $1700/mth PITH, you arrive at a total of $3200/mth for all of your financial obligations. $3200 divided by $7500 equals 0.427, giving you a total debt service ratio of 42.7%.


Here’s where it gets interesting. Based on your GDS alone, you can easily afford the property. But when you factor in all your other expenses, the TDS exceeds the allowable limit of 42% (for an insured mortgage anyway). So why does this matter? Well, as it stands, you wouldn’t qualify for the mortgage, even though you are likely paying more than $1700/mth in rent.


So then, to qualify, it might be as simple as shuffling some of your debt to lower payments. Or maybe you have 10% of the purchase price saved for a downpayment, changing the mortgage structure to 5% down and using the additional 5% to pay out a portion of your debt might be the difference you need to bring it all together.


Here’s the thing, as your actual financial situation is most likely different than the one above, working with an independent mortgage professional is the best way to give yourself options. Don’t do this alone. Your best plan is to seek and rely on the advice provided by an experienced independent mortgage professional. While you might secure a handful of mortgages over your lifetime, we do this every day with people just like you.


It’s never too early to start the conversation about mortgage qualification. Going over your application and assessing your debt service ratios in detail beforehand gives you the time needed to make the financial moves necessary to put yourself in the best financial position.


So if you find yourself questioning what you can afford or if you want to discuss your GDS/TDS ratios to understand the mortgage process a little better, please get in touch. It would be a pleasure to work with you, we can get a preapproval started right away.

Josh Perez
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Best Mortgage Options for Canadian Homebuyers

By Josh Perez • April 8, 2026
Thinking of Calling Your Bank for a Mortgage? Read This First. If you're buying a home or renewing your mortgage, your first instinct might be to call your bank. It's familiar. It's easy. But it might also cost you more than you realize—in money, flexibility, and long-term satisfaction. Before you sign anything, here are four things your bank won’t tell you—and four reasons why working with an independent mortgage professional is the smarter move. 1. Your Bank Offers Limited Mortgage Options Banks can only offer what they sell. So if your financial situation doesn’t fit neatly into their guidelines—or if you’re looking for competitive terms—you might be out of luck. Working with a mortgage broker? You get access to mortgage products from hundreds of lenders : major banks, credit unions, monoline lenders, alternative lenders, B lenders, and even private funds. That means more options, more flexibility, and a much better chance of finding a mortgage that fits you. 2. Bank Reps Are Salespeople—Not Mortgage Strategists Let’s be honest: most bank mortgage reps are trained to sell their employer’s products—not to analyze your financial goals or tailor a long-term mortgage plan. Their job is to generate revenue for the bank. Independent mortgage professionals are different. We’re not tied to one lender—we’re tied to you. Our job is to shop around, negotiate on your behalf, and recommend the mortgage that offers the best balance of rate, terms, and flexibility. And yes, we get paid by the lender—but only after we find you a mortgage that works for your situation. That creates a win-win-win: you get the best deal, we earn our fee, and the lender earns your business. 3. Banks Don’t Lead with Their Best Rate It’s true. Banks often reserve their best rates for those who ask for them—or threaten to walk. And guess what? Most people don’t. Over 50% of Canadians accept the first renewal offer they get by mail. No questions asked. That’s exactly what the banks count on. Mortgage professionals don’t play that game. We start by finding lenders offering competitive rates upfront, and we handle the negotiations for you. There’s no guesswork, no pressure, and no settling for less than you deserve. 4. Bank Mortgages Are Often More Restrictive Than You Think Not all mortgages are created equal. Some come with hidden traps—especially around penalties. Ever heard of a sky-high prepayment charge when someone breaks their mortgage early? That’s often due to something called an Interest Rate Differential (IRD) —and big banks are notorious for using the harshest IRD calculations. When we help you choose a mortgage, we don’t just focus on the interest rate. We look at the whole picture, including: Prepayment privileges Penalty calculations Portability Future flexibility That way, if your life changes, your mortgage won’t become a financial anchor. A Quick Recap What your bank typically offers: Only their own limited mortgage products Sales-focused representatives, not mortgage strategists Default rates that aren’t usually their best Restrictive contracts with high penalties What an independent mortgage professional delivers: Access to over 200 lenders and customized mortgage solutions Personalized advice and long-term financial strategy Competitive rates and terms upfront Transparent, flexible mortgage options designed around your needs Let’s Talk Before You Sign Your mortgage is likely the biggest financial commitment you’ll ever make. So why settle for a one-size-fits-all solution? If you're buying, refinancing, or renewing, I’d love to help you explore your options, explain the fine print, and find a mortgage that truly works for you. Let’s start with a conversation—no pressure, just good advice.

Stop Waiting for the Perfect Time to Buy: A Framework That Actually Works

By Josh Perez • April 3, 2026
Watch the video that inspired this post: Waiting for the perfect time to buy is why most people stay stuck. The Trap That Keeps Buyers on the Sidelines Ask most people why they haven't bought a home yet and you'll hear some version of the same answer: "I'm waiting for the right time." They're watching interest rates. They're tracking home prices. They're waiting for a signal — some clear, unmistakable sign that now is the moment to move. Here's the truth: that signal never comes. Not in the way most people imagine it. The market doesn't send you a notification. There's no headline that reads "Perfect time to buy — act now." And the longer you wait for certainty, the more time passes, the more equity you don't build, and the more rent you pay into someone else's mortgage. Waiting for the perfect time to buy is exactly why most people stay stuck. Why You Can't Time the Market — And Don't Need To Nobody nails the timing. Not investors. Not economists. Not the people who've been watching the market for twenty years. The idea that there's a precise moment when everything aligns perfectly is a myth — and chasing it is one of the most expensive mistakes a buyer can make. What you can do is follow a framework that removes the guesswork. Instead of trying to predict the market, you assess your own situation against three concrete pillars. When all three are in place, the timing question answers itself. The Three-Pillar Framework Pillar 1: Affordability Not what you hope you can stretch into. Not the maximum amount a lender will approve you for. The real, honest monthly payment you can handle without financial stress — with room left over for life. A lot of buyers make the mistake of working backwards from the maximum approval number. That's how you end up house-poor: technically a homeowner, but unable to enjoy any of it because every dollar goes to the mortgage. True affordability means the payment fits your life, not the other way around. Before you start looking at properties, get clear on your number. What monthly payment leaves you comfortable? That's your ceiling — not what the bank says you can borrow. Pillar 2: Stability A mortgage is a long-term commitment. Lenders know this, which is why they scrutinize your employment history and income so closely. But stability isn't just about satisfying a lender — it's about protecting yourself. If your job is secure, your income is consistent, and your financial life isn't in a period of major upheaval, your window is already open. You don't need to be rich. You don't need a perfect credit score. You need a stable foundation that a mortgage can be built on. If your situation is genuinely uncertain — a career change in progress, a major life transition underway — it may make sense to wait until things settle. But if you're stable and simply feeling uncertain because the market feels uncertain, that's a different problem entirely. Pillar 3: Market Fundamentals You don't need to predict where prices are going. You don't need to call the top or the bottom. What you need to assess is whether the market you're buying in has steady demand and whether the carrying costs make sense relative to what you'd pay to rent. In most Ontario markets, the fundamentals have remained strong over the long term. Population growth, limited housing supply, and consistent demand have historically supported property values. That doesn't mean every property in every neighbourhood is a smart buy — but it does mean that a well-chosen purchase in a stable market tends to reward patient owners. When All Three Line Up, Buy This is the framework. It's not complicated, but it is disciplined. When affordability is in place, your situation is stable, and the market fundamentals support a purchase — stop waiting. The timing question has answered itself. Every month you delay in a stable market is a month of appreciation you miss, a month of equity you don't build, and a month of rent that disappears with nothing to show for it. The cost of waiting is real, even when it's invisible. "You're not going to nail the timing. Nobody does. But you can follow a framework that works regardless of what the market's doing." — Josh Perez Apply This to Your Situation The three pillars are straightforward in theory. Applying them to your specific income, credit profile, down payment, and target market is where it gets nuanced — and where working with the right mortgage professional makes all the difference. I've helped over 1,000 people in Ontario work through exactly this kind of analysis. In most cases, buyers are closer to ready than they think. A single conversation is often enough to give you a clear picture of where you stand and what your next step should be.  Ready to stop waiting and start planning? Book your free consultation today and let's apply this framework to your situation.