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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Mortgage Brokering meets mountain biking and craft beer. A couple months ago I set for a bike ride with the intention of answering few mortgage related questions, mission accomplished. Any good bike ride pairs nicely with a tasty beer which we enjoyed @parksidebrewery. Hope you see the passion I have for brokering, biking and beer. @torcabikes #mountainbikingmortgagebroker
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Spotted a ski-bunny today @kirstinjhallett so I trapped ‘er. 📸 credit @troy.hartley
Aidan leading the pack up the Lemming Line in seek of fine fresh powder.
Beautiful British Columbia! A cold winter day at its finest.
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Snow report for today was boot to knee deep in places. Simply an awesome day rippin’ with the kids, I had to show them that I still got it. 📷 credit @jhalskiing
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TEASER alert...at thats what I think they call it in the business. Years ago a wrote a blog called BEERS BIKES AND MORTGAGES. I some how (in my head) blended all 3 topics into 1 blog. Simply put, I enjoy aspects of all 3 with each of them providing something different. I re-united with the talented Regan Payne on a project that I think will shed a bit more light on who I am and what I do. #craftbeer #mountainbike #mortgagebrokerbc #dlccanadainc
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This would have been a fun stunt once upon a time!
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I saw this hat on Instagram, that very moment I knew I needed it. As a BC boy born and bred The Outdoorsman hat needed to be added to my collection. As someone who loves BC and most things outdoor, I’m now glad I have a cool hat to wear and fly the flag of BEAUTIFUL BRITISH COLUMBIA. It will be in my bag for all post-exploration celebratory cold pints. If you want to check them out or add one to your collection go to @nineoclockgun ...and yes my facial hair matches the hat as well.
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This is a great start to the day!
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Wood to wood gap in Whistler.
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Aidan is captaining the watercraft, mom in just the passenger. Kalamaka Lake.
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Saratoga Beach fire.
Canadian tuxedo.
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Distancing myself from the real world!
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What Is a Second Mortgage, Really? (It’s Not What Most People Think) If you’ve heard the term “second mortgage” and assumed it refers to the next mortgage you take out after your first one ends, you’re not alone. It’s a common misconception—but the reality is a bit different. A second mortgage isn’t about the order of mortgages over time. It’s actually about the number of loans secured against a single property —at the same time. So, What Exactly Is a Second Mortgage? When you first buy a home, your mortgage is registered on the property in first position . This simply means your lender has the primary legal claim to your property if you ever sell it or default. A second mortgage is another loan that’s added on top of your existing mortgage. It’s registered in second position , meaning the lender only gets paid out after the first mortgage is settled. If you sell your home, any proceeds go toward paying off the first mortgage first, then the second one, and any remaining equity is yours. It’s important to note: You still keep your original mortgage and keep making payments on it —the second mortgage is an entirely separate agreement layered on top. Why Would Anyone Take Out a Second Mortgage? There are a few good reasons homeowners choose this route: You want to tap into your home equity without refinancing your existing mortgage. Your current mortgage has great terms (like a low interest rate), and breaking it would trigger hefty penalties. You need access to funds quickly , and a second mortgage is faster and more flexible than refinancing. One common use? Debt consolidation . If you’re juggling high-interest credit card or personal loan debt, a second mortgage can help reduce your overall interest costs and improve monthly cash flow. Is a Second Mortgage Right for You? A second mortgage can be a smart solution in the right situation—but it’s not always the best move. It depends on your current mortgage terms, your equity, and your financial goals. If you’re curious about how a second mortgage could work for your situation—or if you’re considering your options to improve cash flow or access equity—let’s talk. I’d be happy to walk you through it and help you explore the right path forward. Reach out anytime—we’ll figure it out together.
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