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Debt service ratios — Gross Debt Service (GDS) and Total Debt Service (TDS) — are the two calculations Canadian lenders use to test whether a borrower’s income can support a mortgage. Insured mortgages generally require a maximum GDS of 39% and TDS of 44%.
GDS looks only at housing costs; TDS adds every other debt payment on top. A borrower can pass GDS comfortably and still fail TDS if they carry a car loan, large credit card balances, or other financing — which is why lenders always run both, not one or the other.
Both ratios are calculated using the same inputs — qualifying income and the minimum qualifying rate rather than the contract rate — so a file has to clear both limits at once. A mortgage broker or agent typically checks both ratios before submitting a deal, since either one failing can mean a smaller approved amount, a co-signer, or a different lender.
Insured maximums: CMHC, Sagen, and Canada Guaranty cap GDS at 39% and TDS at 44% for default-insured files.
Always stress-tested: both ratios are calculated at the minimum qualifying rate — the greater of the contract rate + 2 percentage points or 5.25% — under OSFI Guideline B-20.
Conventional limits vary by lender: uninsured lenders set their own internal GDS/TDS ceilings, and some alternative or private lenders will exceed the insured maximums for the right file.
Core to every application: mortgage agents (Ontario, FSRA), submortgage brokers (BC, BCFSA), mortgage associates (Alberta, RECA), and courtiers hypothécaires (Quebec, AMF) calculate both ratios at the pre-qualification stage, before a lender ever sees the file.
Definitions reflect Canadian federal and provincial rules as of the “Updated” date above. Not advice for any specific file.
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