What Is Your Debt-to-Income Ratio (GDS & TDS)?

When a lender decides how much you can borrow, two numbers do most of the heavy lifting: your GDS and TDS ratios — together known as your debt-to-income ratios. They measure how much of your income is already spoken for, and they set the ceiling on your mortgage. This guide explains both, with a worked example you can follow.

Key takeaways

• GDS (Gross Debt Service) compares your housing costs to your gross income — aim for 39% or less.
• TDS (Total Debt Service) adds all your other debts — aim for 44% or less.
• Both ratios use gross (pre-tax) income, not take-home pay.
• Lower ratios mean more borrowing room; high debt payments reduce how much home you can afford.
• HOMEH gives eligible buyers the industry's highest Cashback Rebate, helping your budget stretch further. Sellers list for 1%, or free when they also buy with HOMEH within 6 months, or $395 + HST with a Mere Posting.

What is debt-to-income ratio?

Your debt-to-income ratio shows what share of your gross (pre-tax) income goes toward debt payments. Canadian lenders use two versions of it — GDS and TDS — to judge whether you can comfortably carry a mortgage. The lower your ratios, the more room you have to borrow.

These ratios sit at the heart of mortgage qualifying. For the bigger picture of how everything fits together, see our guide to how mortgages work in Canada.

GDS: your housing-cost ratio

GDS — Gross Debt Service — measures your housing costs as a percentage of your gross income. It captures the four costs of keeping a roof over your head, sometimes remembered as PITH:

• Principal and Interest on your mortgage
• Taxes (property tax)
• Heating costs
• Plus 50% of condo fees, where applicable

The GDS target

Lenders generally want your GDS ratio to be 39% or less. In other words, no more than about 39% of your gross income should go to housing costs.

TDS: adding the rest of your debts

TDS — Total Debt Service — takes everything in your GDS and adds your other monthly debt payments: car loans, credit card minimums, lines of credit, student loans, and any other obligations. It's the fuller picture of what you owe each month.

The TDS target

Lenders generally want your TDS ratio to be 44% or less. This caps your total debt load relative to your gross income.

Because TDS includes all your debts, paying down a car loan or credit card balance before you apply can directly increase how much mortgage you qualify for.

A worked example

Let's walk through a household with a $120,000 gross annual income, which works out to $10,000 per month. The lender checks both ratios against the targets.

If this household's housing costs total $3,600/month, GDS is $3,600 ÷ $10,000 = 36% — within the 39% target. Add $700/month in car and credit payments and TDS becomes $4,300 ÷ $10,000 = 43% — just inside the 44% limit.

How to improve your ratios

If your ratios are too high, you have a few levers — and they all come down to lowering debt payments or raising qualifying income.

1. Pay down high-payment debts like car loans and credit cards — this lowers your TDS fastest.
2. Increase your down payment so you borrow less and your housing costs drop.
3. Avoid taking on new debt in the months before you apply.
4. Choose a longer amortization where eligible, which lowers monthly payments (and therefore your ratios).

Keep in mind these ratios work alongside the mortgage stress test, which requires you to qualify at the greater of your contract rate plus 2% or 5.25%, and they feed directly into how much house you can afford. When you're ready to run your own numbers, use the HOMEH debt-to-income calculator.

Stretch your budget further

Tight ratios make every dollar count. HOMEH gives eligible buyers the industry's highest Cashback Rebate — extra room for your down payment or closing costs. Sellers list for 1%, or free when they also buy with HOMEH within 6 months, or $395 + HST with a Mere Posting. See yours with the HOMEH cashback calculator.