Gross Debt Service and Total Debt Service are the two calculations every Canadian residential lender runs before anything else about a file matters. GDS asks a narrow question: of this borrower's income, what share would go to keeping this specific roof over their head — the mortgage payment, the property tax, the heat, and a slice of the condo fee if there is one. TDS asks the broader question: of that same income, what share would go to every debt obligation the borrower carries, housing included.
The two ratios exist because either one alone would miss something. A borrower with no other debt and an expensive house could still pass TDS while GDS says the house is too much house. A borrower with a modest, affordable house but four car loans and a large line of credit could pass GDS comfortably while TDS says no. Underwriters run both because a file that fails either one is not approvable as submitted — you need to know which ratio is the actual constraint before you can do anything about it.
Ask a client what their mortgage payment will be and they will quote you the number based on the rate they were shown. That is not the number that goes into GDS and TDS. Both ratios are calculated using a qualifying rate — for most files today, the greater of the contract rate plus 2% or a fixed floor set by OSFI, currently 5.25%. Module 04 covers exactly how this works and, importantly, where it now no longer applies.
This is the single most common source of confusion for a new agent doing their first few ratio calculations by hand: the payment that determines affordability on paper is higher than the payment the client will actually make. That gap is deliberate — it is a buffer against renewal-time rate shock — and it means a file can be genuinely affordable for the client while still failing to qualify on paper.
A handful of terms recur throughout. PITH is the shorthand for the components of GDS: principal, interest, taxes, heat. Ratio room is the gap between where a file sits and the ceiling for that ratio — the thing you are trying to create when a file is tight. Qualifying rate or minimum qualifying rate (MQR), commonly called the stress test, is the rate used to calculate the payment inside both ratios, not the contract rate the client pays.
You will also see the phrase insured, insurable and uninsurable used throughout this course without much explanation — that category is covered in full in Course 01, and it matters here because the ratio ceilings and the qualifying-rate rules both depend on which of the three buckets a file lands in.
This course goes deep on one slice of underwriting that Course 01, The Canadian Mortgage Underwriting Course, only introduces. If you have not taken Course 01, the concepts here will still make sense, but the insurance-category framing in Module 02 and the credit-band framing in Module 05 will land faster if you have.
Rental income treatment inside GDS and TDS gets a brief mention in Module 06 but is deliberately not developed here — Course 08, Rental & Investment Property Underwriting, is where that lives in full, because the add-back and offset methods lenders use for rental income are their own subject.
A borrower's file passes GDS comfortably but fails TDS. What does that tell you about the file?
GDS and TDS test different things. A pass on GDS with a fail on TDS points squarely at debt outside the mortgage — car loans, credit cards, a line of credit — not at the house itself. The tempting wrong answer is to blame the housing cost, but GDS already told you the housing cost is fine; the constraint is somewhere else, and Module 08 walks through exactly how to relieve that kind of pressure.
