GDS and TDS ratios: how they decide your mortgage

Q: Are GDS and TDS calculated at my actual rate or the stress-test rate?

At the stress-test rate — the greater of your contract rate + 2% or 5.25%. That higher rate makes the mortgage-payment portion of the ratio larger, which is exactly why the stress test reduces how much you can borrow. Your real payment is still based on your actual rate.

At a glance

Two numbers decide how much mortgage you qualify for in Canada: your GDS ratio (Gross Debt Service) and your TDS ratio (Total Debt Service). Lenders keep GDS under about 39% and TDS under about 44% — both calculated at the stress-test rate. Here's exactly how they're built, with worked examples, and how to improve them.

Updated January 2026 · 9 min · Reviewed by an FSRA-licensed principal broker.

01GDS and TDS — the two ratios behind every approval

When a lender decides how much mortgage you qualify for, it isn't guessing. It runs two debt-service ratios that compare your obligations to your gross income. Keep both under their limits and the file works; blow through either and the loan shrinks until you do.

GDS (Gross Debt Service) measures housing costs alone. TDS (Total Debt Service) adds every other debt you carry. Both use your gross (pre-tax) income and both price the mortgage payment at the stress-test rate.

39% / 44%

Common GDS / TDS ceilings

for insured Canadian mortgages

02GDS ratio — your housing costs vs income

GDS captures the four costs of keeping a roof over your head, often remembered as PITH: Principal, Interest, Taxes, and Heat — plus half of any condo/strata fees.

GDS = (mortgage P&I at the stress-test rate + property tax + heat + ½ condo fees) ÷ gross monthly income. Most lenders want this at or below about 39%.

Worth knowing

The mortgage-payment portion uses the stress-test rate (contract rate + 2%, or 5.25%), not your real rate. That's why the same income qualifies for less mortgage than your actual payment would suggest.

03TDS ratio — everything you owe vs income

TDS starts with everything in GDS and adds the rest of your monthly debt load: car loans and leases, credit-card minimum payments, lines of credit, student loans, and support payments.

TDS = (all GDS housing costs + all other monthly debt payments) ÷ gross monthly income. Lenders generally cap this at about 44%.

Practitioner tip

Credit-card and line-of-credit balances hurt more than people expect: lenders count a monthly payment of roughly 3% of the balance toward TDS even if you pay it off each month. Carrying a $10,000 balance can cost you ~$300/month of qualifying room.

04A worked example

Take a couple with $9,000 gross monthly income ($108,000/year), buying a home with a $2,600/month mortgage payment at the stress-test rate, $400/month property tax, $150/month heat, and a $450/month car loan.

Practitioner tip

Notice the leverage: eliminating the $450 car payment frees about $450/month of qualifying room — which can support roughly $70,000–$80,000 more mortgage at current rates. Often more powerful than the same cash added to the down payment.

Ratio	Costs included	Monthly total	÷ $9,000 income	Limit	Pass?
GDS	Mortgage + tax + heat	$3,150	35.0%	~39%	Yes
TDS	GDS + $450 car loan	$3,600	40.0%	~44%	Yes

Both ratios sit under the ceilings, so the file qualifies. Pay off the car loan and TDS drops to 35% — freeing room for a larger mortgage.

05How to improve your GDS and TDS ratios

A broker's job is to model your real GDS and TDS across multiple lenders before you make an offer — and to know which lenders' limits, exemptions and qualifying rates give your file the most room. Pair this with our stress test guide to see the full qualifying picture.

Pay down other debt. Clearing a car loan, credit-card balance or line of credit lowers TDS directly — usually the single most effective move.
Add a co-applicant. A spouse or co-signer's income is added to the denominator, lowering both ratios.
Increase your down payment. A smaller mortgage means a smaller payment in the GDS numerator.
Extend the amortization. 30-year amortization (now available to first-time buyers and on new builds) lowers the monthly payment used in the ratios.
Choose a lower-cost property or a different lender. Credit unions and B-lenders permit higher ratios; some qualify at the contract rate.

FAQ

Frequently asked questions

Don’t see yours? Ask Maya.

What is the GDS ratio?

GDS (Gross Debt Service) is the share of your gross monthly income that goes to housing costs: your mortgage payment (calculated at the stress-test rate), property tax, heating, plus half of any condo fees. Most lenders want GDS at or below about 39% for insured mortgages.

What is the TDS ratio?

TDS (Total Debt Service) is your GDS plus all of your other monthly debt obligations — car loans, credit-card minimums, lines of credit, student loans and support payments — divided by gross income. Lenders generally cap TDS at about 44%.

What are the maximum GDS and TDS ratios in Canada?

For insured (less than 20% down) mortgages the common ceilings are 39% GDS and 44% TDS. Some lenders and stronger credit profiles stretch slightly higher; alternative (B) lenders allow higher ratios at a higher rate. Provincial credit unions and private lenders use their own limits.

Are GDS and TDS calculated at my actual rate or the stress-test rate?

At the stress-test rate — the greater of your contract rate + 2% or 5.25%. That higher rate makes the mortgage-payment portion of the ratio larger, which is exactly why the stress test reduces how much you can borrow. Your real payment is still based on your actual rate.

What counts as income for GDS and TDS?

Gross (pre-tax) income that a lender can verify and consider stable: salary, hourly wages with a track record, self-employment income (usually a 2-year average), reliable bonus or commission, and often a portion of rental income. Two applicants' incomes combine, which is why adding a co-applicant improves both ratios.

How can I lower my GDS and TDS ratios?

Pay down or pay off other debt (this directly lowers TDS), add a co-applicant's income, increase your down payment to shrink the mortgage, extend the amortization to lower the payment, or choose a lower-cost property. Clearing a single car loan often unlocks more borrowing power than an equivalent amount added to the down payment.

What if my ratios are slightly over the limit?

You still have options: a slightly larger down payment, a co-signer, a longer amortization (30-year is now available to first-time buyers and on new builds), a credit union that qualifies at the contract rate, or a B-lender that permits higher ratios. A broker matches your file to the lender whose limits fit.

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