Debt service ratio (GDS and TDS) — Canadian mortgage qualifier
GDS and TDS are the two debt service ratios Canadian lenders use to qualify borrowers. Learn the formulas, the OSFI maximums, and how to calculate yours before applying for a mortgage.
Canadian mortgage lenders use two debt service ratios — GDS and TDS — to determine how much you can borrow. Both are measured as a percentage of your gross (before-tax) income. Miss either threshold and your application is declined, regardless of your credit score.
Gross Debt Service ratio (GDS)
GDS measures your housing costs alone as a percentage of gross income. It includes only costs directly related to owning the home:
GDS formula
GDS = (Principal + Interest + Property Tax + Heat + 50% Condo Fee) ÷ Gross Monthly Income × 100 Under OSFI Guideline B-20, federally regulated lenders must hold GDS to 39% or below.
Total Debt Service ratio (TDS)
TDS adds all other debt payments on top of the GDS housing costs:
TDS formula
TDS = (GDS costs + All other monthly debt payments) ÷ Gross Monthly Income × 100 The B-20 maximum for TDS is 44%. Other debt includes car payments, minimum credit card payments, student loan payments, personal loan payments, and any other periodic debt obligations.
Worked example
Borrower profile: Gross monthly income $8,500 | Mortgage P+I $2,200 | Property tax $350 | Heat $150 | Car loan $450 | Credit card minimum $60
Both ratios pass. The borrower qualifies on debt service grounds.
GDS and TDS limits at a glance
| Lender type | Max GDS | Max TDS |
|---|---|---|
| Federally regulated bank (OSFI B-20) | 39% | 44% |
| CMHC-insured mortgage | 39% | 44% |
| Provincial credit union (typical) | 39% | 44% |
| Alternative / B-lender | Up to 42% | Up to 50% |
| Private lender | Case-by-case | Case-by-case |
How to improve your debt service ratios
- Increase income. A co-borrower's income is added to the denominator. If a partner or family member can be on the application, both incomes qualify.
- Pay off debts before applying. Eliminating a car payment of $500/month directly reduces TDS. Even paying off credit cards can help if you are close to the limit.
- Choose a longer amortization. Extending from 25 to 30 years reduces your monthly P+I payment and lowers GDS. Note: 30-year amortizations require a 20% or more down payment to access without CMHC insurance.
- Larger down payment. Reducing the loan amount directly reduces the P+I portion of GDS. Use the Canadian mortgage calculator to model the effect.
GDS/TDS and the stress test
The mortgage stress test interacts directly with GDS and TDS. Lenders must calculate both ratios using the qualifying rate (higher of your contracted rate +2%, or 5.25%), not your actual offered rate. This means the GDS and TDS limits are effectively tighter than they appear — you must pass both ratios at a hypothetical higher payment.
The Bank of Canada publishes the current qualifying rate used in stress test calculations.
Run your Canadian mortgage numbers — including stress test — with the Canadian mortgage calculator. To understand CMHC insurance premiums and how they affect GDS, see the CMHC insurance glossary entry.
External references
- OSFI Guideline B-20 — The federal regulation setting GDS and TDS limits for Canadian banks
- CMHC — Calculate how much you can afford — Official guide including GDS/TDS calculation tools
- Bank of Canada — Interest rates — Current policy rate and qualifying rate used in stress test calculations
- RateHub — GDS and TDS explained — Canadian mortgage broker guide with current threshold details
- MoneySense — Mortgage pre-approval in Canada — How lenders use GDS/TDS in the approval process
Common questions
What is the maximum GDS ratio in Canada?
Under OSFI Guideline B-20, federally regulated lenders (banks) must limit GDS to 39% of gross income. Some credit unions and provincially regulated lenders may allow slightly higher ratios. Lenders can exceed these thresholds for exceptional borrowers but rarely do for insured mortgages.
What is the maximum TDS ratio in Canada?
OSFI B-20 sets a TDS maximum of 44% of gross income for federally regulated lenders. This includes all debt payments — mortgage P+I, property taxes, heat, condo fees (50%), plus car loans, credit card minimums, student loans, and any other monthly obligations. The CMHC affordability calculator applies GDS and TDS limits to your actual income and debts.
What is included in GDS vs TDS?
GDS includes only housing costs: principal + interest, property taxes, heating costs, and 50% of condo fees. TDS adds all other debt payments on top of GDS: auto loans, credit card minimums, lines of credit, student loans, and any other periodic debt obligations. RateHub's GDS/TDS explainer includes a worked example you can follow with your own numbers.
How does the stress test affect GDS and TDS?
The Canadian mortgage stress test requires lenders to calculate GDS and TDS using the higher of either the contract rate +2% or the Bank of Canada qualifying rate (currently 5.25%). This means even if you qualify at your offered rate, you must also qualify at a higher rate — which tightens how much you can borrow.
Can I get a mortgage with a TDS above 44%?
Difficult at federally regulated banks. Private lenders and some credit unions are less strict and may approve higher TDS ratios, typically at higher rates. Alternative lenders (B-lenders) may allow TDS up to 50% with a larger down payment or strong compensating factors like high equity. MoneySense covers how B-lender approvals work and what trade-offs borrowers make when exceeding standard TDS limits.
How is heating cost estimated in the GDS calculation?
Since actual heating costs vary by home and season, lenders use a standardized figure. CMHC and most lenders use $150/month as a default estimate for heating. This is a simplified number — the actual cost of your home does not change this figure in the GDS calculation. CMHC's affordability guide confirms the heating allowance used in their own GDS calculations.