What is GDS (Gross Debt Service Ratio) in Canadian mortgages?
Monthly housing costs divided by gross monthly income. Includes mortgage payment, property tax, heating, and 50% of condo fees.
Why GDS matters
GDS tells a lender whether the home itself is affordable on the borrower's income. It ignores other debts, so it isolates housing cost. A borrower with no other debt can still fail on GDS when property tax, heating and condo fees are high for the income.
How is GDS calculated?
What is the GDS limit for Canadian mortgages?
≤ 39%
GDS example
Worked example
If housing costs are $2,000/month and income is $6,000/month, GDS = 33%.
How brokers use GDS
- Calculate the mortgage payment in GDS at the stress-test qualifying rate, not the contract rate, for insured mortgages and for uninsured mortgages at federally regulated lenders.
- Count only 50% of condo fees, and include property tax and heating even if the client pays them separately.
- If GDS is slightly over 39%, look at a larger down payment, a longer amortization where allowed, or adding a co-borrower with income.
- Rental income is treated differently by each lender. Some add a share of it to income and others offset it against housing costs.
More questions about GDS
What is a good GDS ratio in Canada?
39% or less is the standard limit for insured mortgages and most A-lender files. Lower is better, and some lenders approve or price more easily when GDS is well below the limit.
What is the difference between GDS and TDS?
GDS covers only housing costs. TDS adds every other monthly debt payment, such as car loans, credit cards and lines of credit. A file has to pass both ratios.
Is GDS calculated at the contract rate?
No. For insured mortgages, and uninsured mortgages at federally regulated lenders, the payment used in GDS is calculated at the stress-test qualifying rate.