
Since I normally post once a week but this time took me 2 weeks to post, I'm going to discuss about another important Real Estate Topic, known as GDSR and TDSR.
Gross Debt Service Ratio (GDS)
Mortgage payments + Property taxes + Heating Costs + 50% of condo fees
Annual Income
To calculate your TDS, the lender will take the same GDS calculation but add in any other monthly payments you might have to make, including loans or the minimum payments on any credit card debt. So, the lender adds together your mortgage payments, property taxes, heating costs, 50% of your condo fees and debts, and divides the total by your gross annual income. If the answer equals less than 40 per cent (industry standard), the lender will know you have the money to make all of your monthly payments and you will be on track with getting approved for a mortgage. The formula is as following:
Housing expenses (per GDS) + Credit card interest + Car payments + Loan expenses
Annual Income
If either of your answers go over than the industry standards, you may want to save more for your down payment and/or pay off some existing debt before buying. However, the 32% GDS and 40% TDS standards are guidelines, not rules. If you have a high credit score or some valuable assets, you may still qualify for a mortgage, even if your GDS and TDS are slightly higher than the industry standards. The maximum GDS and TDS allowed is 39% and 44%, respectively.