Mortgage Approval 101: GDS & TDS Explained
Michael Hallett • October 1, 2025
Can You Afford That Mortgage? Let’s Talk About Debt Service Ratios
One of the biggest factors lenders look at when deciding whether you qualify for a mortgage is something called your debt service ratios. It’s a financial check-up to make sure you can handle the payments—not just for your new home, but for everything else you owe as well.
If you’d rather skip the math and have someone walk through this with you, that’s what I’m here for. But if you like to understand how things work behind the scenes, keep reading. We’re going to break down what these ratios are, how to calculate them, and why they matter when it comes to getting approved.
What Are Debt Service Ratios?
Debt service ratios measure your ability to manage your financial obligations based on your income. There are two key ratios lenders care about:
- Gross Debt Service (GDS)
This looks at the percentage of your income that would go toward housing expenses only.
2. Total Debt Service (TDS)
This includes your housing costs plus all other debt payments—car loans, credit cards, student loans, support payments, etc.
How to Calculate GDS and TDS
Let’s break down the formulas.
GDS Formula:
(P + I + T + H + Condo Fees*) ÷ Gross Monthly Income
Where:
P = Principal
I = Interest
T = Property Taxes
H = Heat
Condo fees are usually calculated at 50% of the total amount
TDS Formula:
(GDS + Monthly Debt Payments) ÷ Gross Monthly Income
These ratios tell lenders if your budget is already stretched too thin—or if you’ve got room to safely take on a mortgage.
How High Is Too High?
Most lenders follow maximum thresholds, especially for insured (high-ratio) mortgages.
As of now, those limits are typically:
GDS: Max 39%
TDS: Max 44%
Go above those numbers and your application could be declined, regardless of how confident you feel about your ability to manage the payments.
Real-World Example
Let’s say you’re earning $90,000 a year, or $7,500 a month.
You find a home you love, and the monthly housing costs (mortgage payment, property tax, heat) total $1,700/month.
GDS = $1,700 ÷ $7,500 = 22.7%
You’re well under the 39% cap—so far, so good.
Now factor in your other monthly obligations:
- Car loan: $300
- Child support: $500
- Credit card/line of credit payments: $700
Total other debt = $1,500/month
Now add that to the $1,700 in housing costs:
TDS = $3,200 ÷ $7,500 = 42.7%
Uh oh. Even though your GDS looks great, your TDS is just over the 42% limit. That could put your mortgage approval at risk—even if you’re paying similar or higher rent now.
What Can You Do?
In cases like this, small adjustments can make a big difference:
- Consolidate or restructure your debts to lower monthly payments
- Reallocate part of your down payment to reduce high-interest debt
- Add a co-applicant to increase qualifying income
- Wait and build savings or credit strength before applying
This is where working with an experienced mortgage professional pays off. We can look at your entire financial picture and help you make strategic moves to qualify confidently.
Don’t Leave It to Chance
Everyone’s situation is different, and debt service ratios aren’t something you want to guess at. The earlier you start the conversation, the more time you’ll have to improve your numbers and boost your chances of approval.
If you're wondering how much home you can afford—or want help analyzing your own GDS and TDS—let’s connect. I’d be happy to walk through your numbers and help you build a solid mortgage strategy.
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One of the most common questions, “how long does it take to get pre-qualified?” My response, “how fast can you provide the information I need.”
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Canadian tuxedo.
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A guarantor and a co-signer both help strengthen a mortgage application, but their roles and responsibilities differ in important ways: Co-signer On the title: A co-signer usually goes on both the mortgage and the property title (ownership). Shared ownership: Since they’re on the title, they legally own part of the home. Shared responsibility: They’re equally responsible for making the payments. When it’s used: Often added when the borrower needs help with income qualification (e.g., a parent helping their child qualify for a bigger mortgage). Guarantor Not on the title: A guarantor is on the mortgage but not on the property title. They don’t own the home so don’t have claim to the asset. Back-up payer: They promise to step in and make payments if the borrower defaults. Liability: They’re legally liable for the debt, even without ownership rights or claim to the asset. When it’s used: Usually when the borrower qualifies on income but needs support for fall back/assets or credit reasons (e.g., poor or short credit history). Who can be a guarantor? Guarantors are to be an immediate relative (spouse or common-law partner, parent, grandparent, child or sibling). Typically guarantors occupy the property, in cases where the guarantor does not occupy a rationale for reasonability and ILA is required Quick Example Co-signer: Think of it like a tag-team partner — both are on the mortgage and the deed. If one can’t pay, the other must, but both are on the title. Guarantor: More like a safety net — they don’t share the house, but the lender can still go after them for money if the borrower defaults. When can you use income from a guarantor on a file? Guarantor's qualifying income may be considered under the following circumstances: Uninsurable loans & CMHC Insured/Insurable loans: guarantors must occupy the subject property and be a spouse or common law partner of the borrower Sagen and Canada Guaranty Insured/Insurable loans: immediate family member who may or may not occupy the subject property with documented rationale
If you’ve missed a payment on your credit card or line of credit and you’re wondering how to handle things and if this will impact your creditworthiness down the road, this article is for you. But before we get started, if you have an overdue balance on any of your credit cards at this exact moment, go, make the minimum payment right now. Seriously, log in to your internet banking and make the minimum payment. The rest can wait. Here’s the good news, if you’ve just missed a payment by a couple of days, you have nothing to worry about. Credit reporting agencies only record when you’ve been 30, 60, and 90 days late on a payment. So, if you got busy and missed your minimum payment due date but made the payment as soon as you realized your error, as long as you haven’t been over 30 days late, it shouldn’t show up as a blemish on your credit report. However, there’s nothing wrong with making sure. You can always call your credit card company and let them know what happened. Let them know that you missed the payment but that you paid it as soon as you could. Keeping in contact with them is the key. By giving them a quick call, if you have a history of timely payments, they might even go ahead and refund the interest that accumulated on the missed payment. You never know unless you ask! Now, if you’re having some cash flow issues, and you’ve been 30, 60, or 90 days late on payments, and you haven’t made the minimum payment, your creditworthiness has probably taken a hit. The best thing you can do is make all the minimum payments on your accounts as soon as possible. Getting up to date as quickly as possible will mitigate the damage to your credit score. The worst thing you can do is bury your head in the sand and ignore the problem, because it won’t go away. If you cannot make your payments, the best action plan is to contact your lender regularly until you can. They want to work with you! The last thing they want is radio silence on your end. If they haven’t heard from you after repeated missed payments, they might write off your balance as “bad debt” and assign it to a collection agency. Collections and bad debts look bad on your credit report. As far as qualifying for a mortgage goes, repeated missed payments will negatively impact your ability to get a mortgage. But once you’re back to making regular payments, the more time that goes by, the better your credit will get. It’s all about timing. Always try to be as current as possible with your payments. So If you plan to buy a property in the next couple of years, it’s never too early to work through your financing, especially if you’ve missed a payment or two in the last couple of years and you’re unsure of where you stand with your credit. Please connect directly; it would be a pleasure to walk through your mortgage application and credit report. Let’s look and see exactly where you stand and what steps you need to take to qualify for a mortgage.
