GDS & TDS Ratios Explained 🧮🏡
When applying for a mortgage, one of the most important things lenders look at is your ability to manage debt—also known as debt servicing. This is where GDS and TDS ratios come into play.
đź’ˇ What is GDS?
GDS (Gross Debt Service) measures the portion of your income that goes toward housing expenses.
đź“Š Formula:
(Mortgage Principal + Interest + Property Taxes + Heat) Ă· Gross Annual Income
Your GDS should typically be below 39% if you're applying for an insured mortgage (less than 20% down).
đź’ł What is TDS?
TDS (Total Debt Service) goes a step further and includes all other monthly debts—like car loans, credit card payments, student loans, or support obligations.
đź“Š Formula:
(Mortgage Principal + Interest + Property Taxes + Heat + Other Debts) Ă· Gross Annual Income
TDS must usually stay below 44% for insured mortgages.
Why This Matters:
✅ If you have no other debts, your GDS and TDS will be the same—this strengthens your application.
âś… Each lender has its own GDS/TDS limits, but if you're over the recommended ratios, qualifying for a mortgage becomes much more difficult.
âś… These ratios help protect you (and the lender) from taking on too much financial risk.
📞 Have questions about your numbers or how to improve your ratios before applying for a mortgage? Let’s chat—I’d love to help you navigate your options!
