Debt-service ratios are the gatekeepers of every Canadian mortgage approval. Two numbers, GDS and TDS, decide how much house a client can carry, and the federal stress test makes both stricter than the contract rate suggests. The calculator above applies the full calculation; the rest of this page explains what goes into it, walks through a worked example, and covers the lender rules that move a tight file one way or the other.
What GDS and TDS measure
GDS: Gross Debt Service ratio
GDS measures housing costs against gross income. The numerator is the classic “PITH” basket:
- P + I: the mortgage principal and interest payment, calculated at the qualifying rate, not the contract rate
- T: property taxes
- H: heating costs
- Plus 50% of condo fees, where applicable
Divide that monthly total by gross monthly income. The commonly applied insured guideline caps GDS at 39%.
GDS = (stress-tested P+I + taxes + heat + 50% of condo fees) ÷ gross monthly income
TDS: Total Debt Service ratio
TDS takes the entire GDS numerator and adds every other monthly obligation: car loans and leases, credit card and line-of-credit payments (typically 3% of the outstanding balance if revolving), student loans, support payments, and co-signed debts. The commonly applied insured guideline caps TDS at 44%.
TDS = (GDS costs + all other monthly debt payments) ÷ gross monthly income
A client can pass GDS comfortably and still fail on TDS. A $700 truck payment moves TDS by roughly 5 to 8 points on a typical income, which is often the difference between an approval and a decline.
The stress test changes the payment you qualify with
Both ratios use the mortgage payment at the minimum qualifying rate: the higher of the contract rate plus 2 percentage points and the regulatory floor (5.25% when the current framework was introduced). The floor is reviewed periodically, so verify the current value against OSFI's published minimum qualifying rate before quoting. A client offered 4.5% is therefore qualified as if they were paying 6.5%, which is why the stress-tested payment above is the one that decides the file.
The payment the client actually makes is the one at the contract rate. The calculator shows both so you can explain the gap: the stress test is a qualification hurdle, not a cost.
A worked example
Household income of $140,000 ($11,667 a month), buying at $550,000 with 20% down ($440,000 mortgage), contract rate 4.5%, 25-year amortization, $350 a month property tax, $150 a month heat, no condo fees, and a $550 a month car loan. These are the calculator's defaults.
- Qualifying rate: the higher of 4.5% + 2% and 5.25% = 6.5%
- P+I at 6.5% with semi-annual compounding: about $2,947 a month (versus about $2,435 at the contract rate, the payment they will actually make)
- GDS = (2,947 + 350 + 150) ÷ 11,667 = 29.5%, under 39
- TDS = (2,947 + 350 + 150 + 550) ÷ 11,667 = 34.3%, under 44
- Maximum mortgage at the guidelines: about $605,000, with GDS as the binding ratio
This file qualifies with room to spare, but notice the stress test added roughly $500 a month to the qualifying payment. That is the gap that surprises clients who pre-shopped with a generic affordability calculator.
How the maximum mortgage is calculated
The calculator works backwards from income. It takes 39% of gross monthly income, subtracts taxes, heat and half the condo fees to get the largest P+I payment GDS allows, then does the same with 44% and the other debts for TDS. The smaller of the two is the binding payment, and the mortgage that payment supports at the qualifying rate over the chosen amortization is the maximum. It is a ceiling on the ratios only; down payment, loan-to-value, credit and property all still apply.
Are 39% and 44% hard limits?
No. They are the commonly applied guidelines for insured mortgages (CMHC and the private insurers), and they are where most files are underwritten. Conventional lenders have discretion, some products allow higher ratios with compensating factors, and credit unions and alternative lenders run their own boxes. Guidelines are ceilings, not entitlements: insurers and lenders can hold tighter internal limits, especially for weaker credit. Treat this calculator as the mainstream case.
Details that move a file
- Heat is not optional. Lenders impute a heating cost even when the client does not provide one; conventions vary by lender and property size, and a flat estimate such as $100 to $150 a month is common.
- Rental offsets vary wildly. How much rental income counts, and whether it adds to income or offsets the rental's housing cost, is lender policy, not regulation. Confirm before promising numbers.
- Revolving balances qualify at about 3%. A $20,000 credit-card or line-of-credit balance is usually carried as a $600 monthly payment. Many lenders qualify a HELOC on its limit, not its balance.
- Condo fees count at 50%. Only half the monthly fee goes into the PITH basket, which is why a $600 fee costs less room than a $300 tax increase.
- Property taxes are estimated on new purchases. Lenders use the current assessment or a percentage of the purchase price; a low estimate can unravel at funding.
- Conventional files have more latitude. The 39/44 guidelines bind insured mortgages; uninsured lending can differ by lender, and amortizations beyond 25 years are available on uninsured files and, since December 2024, on insured purchases by first-time buyers and of new builds (30 years).
How to bring a tight file under the guidelines
- Lengthen the amortization where the product allows it. Moving from 25 to 30 years lowers the stress-tested payment by roughly 8% to 10%.
- Pay down or close revolving credit before submission. Every $10,000 of revolving balance cleared frees about $300 a month of TDS.
- Increase the down payment, which lowers P+I directly, or add a co-borrower whose income outweighs their debts.
- Document all income. Bonuses, overtime and part-time income often count with a two-year history; child benefits count with some lenders.
- Choose the lender for the file. Rental treatment, HELOC treatment and ratio flexibility differ; a file that fails one box can pass another without any change to the client.
Frequently asked questions
What is a good GDS or TDS ratio?
For insured mortgages the commonly applied guidelines are 39% GDS and 44% TDS, measured with the payment at the stress-test rate. Anything under those is a pass on the ratios; the lower the ratio, the more room the file has for a rate increase, a new car payment, or a lender with a tighter box.
Does the stress test apply at renewal?
Renewing with the same lender does not require re-qualification. A straight switch to a new lender at renewal, with the same balance and amortization, has been exempt from the minimum qualifying rate for uninsured mortgages since November 2024 and was already exempt for insured mortgages. A refinance that adds money or resets the amortization is fully re-qualified at the stress-test rate.
Does rental income count toward GDS and TDS?
Usually, but how much and how is lender policy rather than regulation. Some lenders add a percentage of the rent, often 50% to 80%, to income; others subtract it from the housing cost of the rental property. Confirm the treatment with the lender before quoting a client a maximum.
Do the 39% and 44% guidelines apply to uninsured mortgages?
They are the insured guidelines, and most conventional lenders use them or something close. Lenders have discretion on uninsured files, and some products allow higher ratios with compensating factors such as strong credit, liquid assets, or a low loan-to-value.
Which rate does the stress test use for a variable-rate mortgage?
The same rule: the higher of the contract rate plus 2 percentage points and the regulatory floor. For a variable, the contract rate is the current rate including the discount off prime, not prime itself.
How do lenders treat a line of credit in TDS?
Most qualify a revolving balance at about 3% of the outstanding balance per month, and many qualify a HELOC on its limit rather than its balance. A paid-off but open line can still cost room on some lenders’ boxes, so close or reduce limits before submission when a file is tight.
More free broker tools and guides
- Mortgage payment calculator: client-ready payments with semi-annual compounding
- Mortgage penalty calculator: IRD versus 3 months' interest, with the posted-rate and market-rate methods explained
- Proof of down payment: the 90-day trail, gift letters, large deposits
- FINTRAC compliance for mortgage brokers
Estimates for professional discussion, not a qualification decision or advice. Guidelines and the qualifying-rate floor change; verify current OSFI, CMHC, and lender criteria before relying on any number here. Inside BrokerOS, these ratios are calculated on the live client file and re-run as the file changes, stress test included, so qualification stops being a spreadsheet exercise.