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Insights & advice

What are debt service ratios (GDSR/TDSR)?

May 2022 – 15 min read

Key takeaways

  • Debt service ratios help determine your ability to repay your mortgage

  • You can calculate your GDSR and TDSR or a mortgage provider will do it for you

  • If your GDSR and TDSR are high, you may have to reconsider the cost of the home you can afford

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What are the gross and total debt service ratios?

The gross debt service ratio (GDSR) is 1 of 2 calculations a mortgage provider uses to stress test your ability to pay shelter-related costs and determine how large a mortgage you can afford. 

The GDSR is the percentage of your pre-tax income you’ll use to pay for housing costs including mortgage payments, heating costs,  property taxes and if applicable, condo fees.

The second calculation is the total debt service ratio (TDSR) which includes all your outstanding personal debt (mortgage, car loans, credit card, lines of credit, etc.).

The acceptable GDSR and TDSR varies by mortgage provider. Most mortgage providers are looking for a maximum GDSR of 32% and a maximum TDSR of 40%. However, most borrowers with good credit and a reliable income will be allowed to exceed these guidelines.

How to calculate GDSR and TDSR

You can try calculating your GDSR and TDSR, or a Canada Life credit planning consultant can do it for you.

  • For GDSR

    1. Total your mortgage payments, property taxes, heating costs for one year and if applicable, 50% of your annual condo fees
    2. Divide this total by your annual pre-tax household income
    3. Multiply this number by 100 to get your GDSR
  • For TDSR

    1. Total your mortgage payments, property taxes, heating costs for one year and if applicable, 50% of your annual condo fees
    2. Add your total debt payments for all other loans and credit cards for one year.
    3. Add the sums in steps 1 and 2 together.
    4. Divide this total by your annual pre-tax household income
    5. Multiply this number by 100 to get your TDSR

What a high GDSR/TDSR means

A high GDSR and TDSR ratio (close to the maximum or over) may not disqualify you from getting approved for a mortgage. However, you may have to reconsider the cost of the home you can afford, or if there are other monthly expenses you could reduce like loans or your credit card balance.

A GDSR and TDSR below the maximum means you should comfortably afford your mortgage and associated home ownership costs and could potentially afford a more expensive property.

What’s next?

Now that you understand more about the GDSR/TDSR, you may want to contact your advisor to refer you to a credit planning consultant to:

  • Confirm the size of mortgage you can afford

  • Look at ways to pay down debt or increase your down payment

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The information provided is based on current laws, regulations and other rules applicable to Canadian residents. It is accurate to the best of our knowledge as of the date of publication. Rules and their interpretation may change, affecting the accuracy of the information. The information provided is general in nature, and should not be relied upon as a substitute for advice in any specific situation. For specific situations, advice should be obtained from the appropriate legal, accounting, tax or other professional advisors.