GDSR and TDSR


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.

Mortgage rates and affordability seems to be a hot topic of the real estate industry followers, specially the buyers these days. I’m sure you all know the following terminologies and how they work, but for the purpose of clarification, I am sharing a summary of GDSR and TDSR. These 2 are a couple of the main indicators that determine how much you can afford to borrow from the bank. 

Gross Debt Service Ratio (GDS)
To calculate your GDS, lenders try to figure out the proportion of your income you would be paying each month to own a particular property. First, the lender will estimate your annual mortgage payments, property taxes, heating costs and 50% of your condo fees (if applicable). The lender will then add that up and divide it by your gross annual income. If the answer equals less than 32 per cent (industry standard), the lender can feel confident in your ability to pay your monthly housing costs. The formula is as following:

Mortgage payments + Property taxes + Heating Costs + 50% of condo fees


Annual Income


Total Debt Service Ratio (TDS)
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


What happens if I'm over the industry standard?
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.