GDS and TDS: The Two Ratios That Actually Decide What You Can Borrow
Most people shopping for a mortgage have heard the word “qualify” without ever seeing the two numbers a lender actually runs to get there. Here's how GDS and TDS work, what counts toward each, and where a condo fee or a car loan quietly changes the answer.
The short version
- GDS (Gross Debt Service) compares your housing costs — mortgage payment, property tax, heat and 50% of condo fees — against your gross income.
- TDS (Total Debt Service) adds every other debt payment you carry — credit cards, car loans, lines of credit — on top of GDS.
- Canada Mortgage and Housing Corporation caps GDS at 39% and TDS at 44% for the mortgages it insures, and most lenders apply comparable limits.
- Only 50% of condo fees count toward these ratios, but 100% of a secured line of credit's calculated payment does — two very different debts, treated very differently.
- These ratios are calculated against your gross (pre-tax) income, not what actually lands in your bank account, which is why the number a lender quotes can feel higher than what you'd budget for yourself.
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.
Nearly thirty years in Canadian financial services, based in Waterloo Region and working across Ontario. Most people are handed a product — you deserve a plan.
GDS and TDS figures cited are Canada Mortgage and Housing Corporation's published maximums for insured mortgages; individual lenders may apply different limits on uninsured products. Everything here is general information only, illustrative, and subject to full qualification, lender approval and final terms.
Sources: Canada Mortgage and Housing Corporation — Calculating GDS/TDS