Key takeaways
- →GDS covers housing costs alone; TDS adds every other debt obligation into the same ratio. CMHC restricts both to 39% (GDS) and 44% (TDS) for insured mortgages.
- →Only 50% of condo fees count toward GDS/TDS for most files — a rule brokers miscalculate in both directions, sometimes pushing a good file into a false decline.
- →Secured and unsecured lines of credit are treated differently in the calculation — unsecured debt at a minimum 3% of balance, secured debt amortized over 25 years — and mixing the two up changes the ratio meaningfully.
- →The recurring errors are consistent across files: qualifying at the contract rate instead of the MQR, miscounting the condo fee share, and undisclosed debts surfacing after submission.
GDS and TDS sound like simple percentages until you actually run them on a real file — condo fees, a car loan, a secured line of credit, and rental income all pull the number in different directions, and the rules for each are specific enough to trip up an experienced broker.
These are three Canadian files, run by hand, the way a lender's underwriter actually calculates them — plus the handful of calculation mistakes that generate more conditions than anything else on an otherwise strong application.
01 · What do GDS and TDS actually measure?
GDS (Gross Debt Service) measures housing costs — mortgage payment, property tax, heat, and a share of condo fees — against gross income. TDS (Total Debt Service) adds every other debt obligation into that same ratio. For insured mortgages, CMHC restricts both ratios to a maximum of 39% (GDS) and 44% (TDS), calculated at the qualifying rate covered in our stress test working reference, not the contract rate.
The line items are more specific than most brokers assume: only 50% of condominium fees count toward the ratio; unsecured revolving credit (credit cards, unsecured lines of credit) is factored at a minimum of 3% of the outstanding balance per month; and secured lines of credit are factored as if amortized over 25 years at the contract rate. Getting any one of these wrong changes the ratio enough to flip an approval.
02 · Example 1: what does the math look like on a clean salaried file?
A straightforward file with no complicating debt is the easiest to see the mechanics on:
| Line item | Amount |
|---|---|
| Gross annual income | $110,000 |
| Monthly mortgage payment (P&I, at qualifying rate) | $2,450 |
| Monthly property tax | $350 |
| Monthly heat | $120 |
| GDS (housing costs ÷ gross monthly income) | 31.9% |
| Other monthly debt | $0 |
| TDS (same numerator, no other debt) | 31.9% |
With no other debt, GDS and TDS are identical, and both land comfortably under the 39%/44% ceiling. This is the file type least likely to generate a ratio-related condition — which is exactly why the next two examples matter more.
03 · Example 2: how do condo fees and a car loan push TDS toward the limit?
Add a condo fee and a car payment to a similar income and the ratio moves quickly:
| Line item | Amount |
|---|---|
| Gross annual income | $95,000 |
| Monthly mortgage payment (P&I, at qualifying rate) | $2,100 |
| Monthly property tax | $280 |
| Monthly heat | $90 |
| Condo fees (total) | $420 |
| Condo fees counted (50%) | $210 |
| GDS | 33.9% |
| Car loan payment | $480 |
| TDS | 39.9% |
The most common error on a file like this runs both directions: counting the full condo fee instead of the 50% share overstates the ratio and can generate a false decline, while forgetting the condo fee entirely understates it and produces a surprise condition once the underwriter recalculates. Either way, the fix is the same — apply the 50% rule correctly before submission, not after a condition comes back.
Ratios run right, the first time
Catch the condo-fee and rate errors before a lender does.
Treadstone's fulfillment associates verify every GDS/TDS calculation against the qualifying rate before submission. Or run the check yourself with early access to Engage's AI mortgage underwriting.
04 · Example 3: how does rental income change the calculation?
Rental income offsets are the least standardized part of the calculation, which is exactly why they cause the most disagreement between what a broker expects and what a lender approves. For insured mortgages, CMHC's general treatment allows up to 50% of gross rental income from the subject property to be added to income (with taxes and heat then excluded from the ratio calculation), and up to 100% of gross rental income for a two-unit owner-occupied property's secondary suite.
- →For a rental property that is not the subject of the mortgage loan insurance application, net rental income can form part of gross annual income instead.
- →Uninsured lenders are not bound by CMHC's specific insured-program treatment and commonly set their own rental add-back rules, which can be more or less generous depending on the lender and program — always confirm the specific policy before quoting a client a ratio.
- →A rental offset that looks fine on paper can still get a file bounced if the lease or rental history documentation doesn't match what was claimed — document the income the same way you'd document employment income.
Because this is the file type with the most lender-to-lender variation, it's also the one where a documented, written calculation matters most — see our deeper walkthrough on self-employed mortgage underwriting in Canada, where non-standard income calculations follow a similar logic.
05 · What calculation errors come back as conditions the most often?
- 01Qualifying at the contract rate instead of the MQR. The single most common ratio error — it produces a number that looks better than what the lender will actually calculate.
- 02Miscounting the condo fee share. Either direction — 100% instead of 50%, or omitting it — changes the ratio enough to matter.
- 03Undisclosed debts surfacing on the bureau pull. A car loan or line of credit the client didn't mention shows up after submission and forces a TDS recalculation mid-file.
- 04Secured line of credit treated like an unsecured one. The 25-year amortization assumption on secured credit produces a different monthly figure than the 3%-of-balance rule for unsecured debt — mixing them up skews the ratio in either direction.
Running this calculation consistently, on every file, before it reaches a lender, is the specific discipline covered in the Broker's Underwriting Handbook, and it's exactly what an early-access tool like Treadstone's AI mortgage underwriting is built to run automatically before a file is submitted.
Frequently asked questions
This article is general information to help you scale — not a substitute for tailored advice on your specific business, licensing, or compliance obligations. All figures are illustrative examples for planning purposes; actual costs vary by province, market, and brokerage.