When you're applying for a mortgage, lenders want to make sure you can comfortably afford the home you're buying. That's where two key ratios come in: GDSR and TDSR. These help lenders understand how much of your income is going toward housing and other debts.

1. GDSR — Gross Debt Service Ratio

Your GDSR looks only at the costs related to owning a home. Think of it as: "What percent of my income goes to keeping a roof over my head?"

It includes your:

  • Mortgage payments
  • Property taxes
  • Heating costs
  • Plus 50% of condo fees (if applicable)

Formula:

GDSR=Mortgage+Property Taxes+Heating+50% Condo FeesGross Monthly Income×100GDSR = \frac \times 100

Typical Bank Limit: Around 39% to 44%

👉 Why it matters: Lenders want to be sure you aren't putting too much of your income into housing. Ideally, no more than about one-third of your gross income should go toward shelter.

2. TDSR — Total Debt Service Ratio

Your TDSR looks at the bigger picture: housing plus all other monthly debts.

This includes:

  • Everything in the GDSR (mortgage + taxes + heat, etc.)
  • Car payments
  • Credit card minimum payments
  • Student loans
  • Any other monthly loan obligations

Formula:

TDSR=Housing Costs (PITH)+Other Monthly DebtsGross Monthly Income×100TDSR = \frac \times 100

Typical Bank Limit: Around 40% to 44%

👉 Why it matters: Lenders want to ensure that after you pay your home-related expenses and your other debts, you still have enough left for everyday life—food, transportation, savings, and emergencies.

3. Beyond the Numbers: What Else Lenders Look At

Even if your debt ratios look good, lenders consider a few more factors before giving a final approval.

✓ The Stress Test

Lenders don't use your actual rate when qualifying you—they test you at a higher rate to make sure you could still afford payments if interest rates rise.

This "qualifying rate" is usually:

  • Your mortgage rate + 2%, or
  • 5.25% (whichever is higher)

✓ Your Credit Score

A great credit score (typically 680+) gives you more flexibility. You may be allowed to go to the higher end of debt ratios (like 39%/44%).

Lower credit scores may mean stricter limits.

✓ Your Down Payment (Loan-to-Value Ratio)

A larger down payment (especially 20% or more) can give you more breathing room in the debt ratios. With a smaller down payment (like 5%), lenders often tighten the rules.

✨ Quick Summary

  • GDSR and TDSR help determine how much you can borrow.
  • Credit score and down payment help determine what interest rate you'll get.
  • Lenders want to ensure you're financially comfortable—not just approved.