Debt Service Ratios | GDS & TDS

What is Debt Servicing?

Debt servicing simply refers to the relationship between available income and cashflow to service principal and/or interest payments on debt obligations. This calculation, typically expressed as a percentage, is used by mortgage lenders and credit facilitators to establish that you will be able to sustain the loan payments. Depending on the lender and credit facility you are seeking, will determine the level of scrutiny and guidelines for debt service coverage and acceptable ratios. In this brief article, we will provide you with information on debt service ratios and how to calculate your GDS & TDS ratios. 

Gross Debt Service (GDS)

Gross Debt Service = Principal + Interest + Property Tax + Heat + Condominium Fees x 50%*

Total Debt Service (TDS) 

GDS + Other Monthly Obligations such as a card loan, personal loan, and credit card debt. 

Example 

Applicant: Smith, John & Janet 
Property Location: Toronto, Ontario
Gross Annual Income: $85,000.00
Monthly Mortgage Payment (P + I): $1,500.00
Monthly Property Tax (T): $225.00
Monthly Heat (H): $125.00
Monthly Condo Fee (C): $500 x 50%: $250.00
Monthly Car Loan & Persona Loan: $650.00

GDS Calculation

TDS Calculation

P + I + T + H + C x 50% = $2,100.00 x 12 = $25,200.00 + $650.00 x 12  ($7,800.00) = $33,000
Gross Annual Income = $85,000.00
TDS Ratio = 38.82%

Requirements for Debt Service Ratios | GDS & TDS:

CMHC Insured Mortgage: 35% / 45%
Sagen Financial (Formally Genworth Financial) Mortgage: 39% / 44% 
Canada Guaranty Insured Mortgage:  39% / 44% 
Alternative Mortgage: up to 48% / 50% +
Private Mortgage: N/A