GDS/TDS Ratios Explained
“Debt servicing” measures your ability to meet financial obligations. Lenders use two ratios to assess if you can service a mortgage:
Gross Debt Service (GDS) Ratio: The percentage of your monthly income covering housing costs.
GDS Calculation:
Principal + Interest + Taxes + Heat
/Gross Annual Income
Total Debt Service (TDS) Ratio: The percentage of your monthly income covering housing costs and all other debts.
TDS Calculation:
Principal + Interest + Taxes + Heat + Other Debts
/Gross Annual Income
Lenders have guidelines for maximum GDS/TDS ratios. For conventional mortgages, these vary by lender and product. For high-ratio mortgages requiring default insurance, the maximum GDS is 39% and TDS is 44%.
If you have no debts, your GDS and TDS will be the same, which is ideal.
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