Short answer: Canadian lenders don't use one single "debt-to-income ratio." They use two specific calculations, GDS (Gross Debt Service) and TDS (Total Debt Service), and both need to fall within set limits before you qualify.
GDS: Gross Debt Service Ratio
GDS measures your housing costs against your gross (pre-tax) income: your mortgage payment (principal and interest), property tax, heating costs, and 50% of any condo fees, divided by your gross income. Most lenders want this at or below 39%.
TDS: Total Debt Service Ratio
TDS takes everything in GDS and adds all your other debt obligations, car loans, credit card minimum payments, lines of credit, student loans, divided by your gross income. Most lenders want this at or below 44%.
A Real Example
Say your household gross income is $120,000/year ($10,000/month). At a 39% GDS limit, your housing costs (mortgage + tax + heat + half of condo fees) could go up to $3,900/month. If you also carry a $500/month car loan and $200/month in credit card minimums, your TDS limit of 44% ($4,400/month total) leaves only $500/month of additional debt room beyond your housing costs, meaning that car loan alone uses your entire remaining allowance.
Some Flexibility Exists
Borrowers with strong credit and a solid overall file can sometimes qualify with a TDS slightly above 44%, up to around 44-50% depending on the lender and insurer, but this isn't guaranteed and varies case by case. It's not something to plan around by default.
How to Improve Your Ratios
- Pay down existing debt, especially anything with a high minimum payment relative to its balance, like credit cards.
- Increase your down payment, which lowers your mortgage amount and therefore your GDS.
- Extend your amortization (up to 25 or 30 years depending on your down payment and insurer) to lower your monthly payment.
- Add a qualified co-borrower to increase the household income the ratios are calculated against.
Want to Know Your Real Ratios?
We'll calculate your actual GDS and TDS before you start house hunting, so your budget is based on real numbers. Get pre-approved properly.