GDS is calculated as principal plus interest plus property tax plus heat, divided by gross annual income, expressed as a percentage. Each of the four cost components is there because it is a cost the borrower cannot easily walk away from if things get tight — you can cancel a streaming subscription, you cannot stop paying property tax.
Principal and interest are calculated using the mortgage amount, the amortization, and the qualifying rate discussed in Module 04 — not the contract rate. Get this one wrong and every ratio calculation that follows is wrong, so it is worth double-checking which rate you used before you trust a GDS number.
Property tax goes into GDS at its full annual amount, divided into the monthly figure the ratio calculation needs. For an existing property this is usually straightforward — the current tax bill or the municipal assessment gives you a real number. For new construction or a property that has not yet been reassessed at its post-sale value, you are working from an estimate, and an estimate that is too low will understate GDS and set the file up to look tighter than it actually is once the real bill arrives.
This is a place where a broker's local knowledge earns its keep. Municipal mill rates vary enormously across Canada, and a property that closes at a purchase price well above its last assessed value will very likely see its tax bill jump at the next reassessment. Underwriters increasingly ask for a tax estimate based on the new purchase price rather than the seller's old bill, precisely to avoid this trap.
Heat is the one PITH component that is rarely documented with the same precision as the others, because heating costs vary with the specific unit, the winter, and the household's habits. The expected practice is to use actual heat cost records when the borrower or the listing can provide them, and to fall back on a reasonable estimate — based on the property's size, location and heating system type — when they cannot.
In practice this means a poorly insulated detached home in a cold climate should carry a materially higher heat estimate than a well-insulated new-build condo, even at similar square footage. An underwriter who sees an unrealistically low flat heat number on a large rural property is going to ask for support, and a broker who anticipates that question before submission saves everyone a round trip.
Fifty percent of the monthly condominium or homeowners' association fee is included in both GDS and TDS. The logic is that a condo fee typically bundles building insurance, common-area maintenance and sometimes utilities that a detached homeowner would otherwise pay for separately and in full — so only half is counted to avoid double-penalizing the borrower for costs a house owner absorbs elsewhere.
Leasehold tenure works differently: where the borrower pays an annual site or ground lease rather than owning the land outright, 100% of that lease payment is included, not 50%. Mixing these two up — applying the condo discount to a leasehold rent, or vice versa — is a common early-career error and one worth checking deliberately on any file with either feature.
The number most brokers quote is a maximum GDS of 39%. That figure sits inside a two-tier guideline: a standard threshold of 35% GDS, and a maximum threshold of 39% GDS that is tied to a recommended minimum credit score — not available to every file simply because the borrower wants it. Module 05 unpacks exactly how the credit-score link works and what happens to a borrower who sits below it.
The practical takeaway for now is that 39% is a ceiling that has to be earned by the strength of the rest of the file, not a number every borrower is automatically entitled to use.
A client's new condo has a $600/month condo fee. How much of that fee is included in the GDS calculation?
Fifty percent of condo fees is the standard treatment in both GDS and TDS, so $300 goes into the calculation. The tempting wrong answer is the full $600, because it feels conservative to include the whole fee — but that would double-count costs the fee is assumed to bundle, like building insurance and common-area upkeep, that a detached-home borrower would pay separately and in full. The 100%-inclusion rule is reserved for leasehold site or ground rent, a different situation entirely.
