Mortgage Approval 101: GDS & TDS Explained

Sabeena Bubber • January 14, 2026

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:

  1. 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.


SHARE THIS ARTICLE

RECENT POSTS

RRSP Home Buyers’ Plan Explained: A Smart Way to Buy Your First Home

By Sabeena Bubber • May 27, 2026
Saving for a down payment is one of the biggest challenges first-time buyers face. What many don’t realize is that the Canadian government offers a program designed to make it easier—the Home Buyers’ Plan (HBP) . This program allows you to withdraw money from your RRSP to help purchase your first home, without immediate tax consequences. Here’s how it works: Who Qualifies? To be eligible, you generally need to be a first-time home buyer. In practical terms, this means you must not have owned a home in the past four years, nor lived in a property owned by your spouse or partner during that time. There are also special allowances if you’re living with a disability or helping a relative with a disability. In these cases, you can use the HBP even if you’ve owned a home more recently. How Much Can You Withdraw? Under the program, you can access up to $35,000 from your RRSP as an individual. Couples can combine their withdrawals for a total of $70,000 . These funds must have been in your RRSP for at least 90 days before you take them out. Paying It Back The HBP isn’t “free money”—it’s an interest-free loan from your own retirement savings. You’ll have 15 years to repay the full amount back into your RRSP, starting in the second year after withdrawal. Each year, the CRA will send you an HBP Statement of Account outlining how much needs to be repaid. If you don’t make your repayment in a given year, that amount will be added to your taxable income. Why It’s a Smart Strategy The HBP can give first-time buyers a powerful boost toward homeownership. It helps you put together a larger down payment, which can reduce your mortgage amount and monthly payments. Just remember: it’s important to balance the short-term benefit of homeownership with the long-term impact on your retirement savings. Next Steps Thinking about using the Home Buyers’ Plan? Let’s sit down and review whether it’s the right move for you. Together, we can create a strategy that gets you into your first home while keeping your future financial goals on track. 📞 Reach out anytime—it would be a pleasure to guide you through the process.

Deposit vs. Down Payment: Key Differences for Homebuyers

By Sabeena Bubber • May 20, 2026
When you’re buying a home, two terms often cause confusion: deposit and down payment . While they’re related, they serve very different purposes in the homebuying process. Here’s what you need to know. What Is a Deposit? A deposit is the money you provide when you make an offer on a property. Think of it as a show of good faith that proves you’re serious about purchasing. How it works : Typically, you provide a certified cheque or bank draft that your real estate brokerage holds in trust. If your offer is accepted, the deposit remains in trust until the deal moves forward. If negotiations fall through, the deposit is refunded. Connection to your down payment : Once the sale is finalized, your deposit becomes part of your total down payment. Why it matters : The amount is negotiable, but a larger deposit can make your offer more attractive in a competitive market. Keep in mind, however, that if you back out after conditions are removed, you risk losing your deposit. What Is a Down Payment? Your down payment is the amount you contribute toward the purchase price of your home when securing a mortgage. Minimum requirement : In Canada, the minimum down payment is 5% of the home’s purchase price. Anything less than 20% requires mortgage default insurance. Sources : Down payments can come from your savings, the sale of another property, RRSP withdrawals (through the Home Buyers’ Plan), a gift from family, or even borrowed funds. Example: How They Work Together Imagine you’re buying a $400,000 home with a 10% down payment ($40,000). When you make your offer, you provide a $10,000 deposit . Once conditions are met, that deposit is transferred to your lawyer’s trust account. At closing, you add the remaining $30,000 to complete your full down payment. The lender provides the rest—$360,000—through your mortgage. The Bottom Line Your deposit shows commitment and secures your offer, while your down payment is what makes the mortgage possible. Together, they work hand in hand to get you into your new home. 📞 If you’d like clarity on deposits, down payments, or any other part of the mortgage process, let’s connect. I’d be happy to walk you through it step by step.

Employment and Mortgage Qualification: What Lenders Look For

By Sabeena Bubber • May 13, 2026
When you apply for a mortgage, your employment history and status carry a lot of weight. Even if you feel secure in your job, lenders need proof that your income is reliable and will continue. To them, your employment status is one of the strongest indicators of whether you can make your mortgage payments long term. Here’s how lenders typically view different employment situations: Permanent Employment This is the gold standard. Once you’ve passed any probationary period and hold permanent status, lenders see you as a lower risk. It shows that your employer is committed to you, and your income is steady. Probationary Periods If you’re still on probation—usually 3 to 6 months, though sometimes longer—lenders may hesitate. That’s because your employer can end your contract without cause during this period. Once probation is over, you’re considered more secure. That said, context matters. If you’ve worked with the same company for years as a contractor and just transitioned into full-time employment, lenders may accept a letter from your employer confirming that probation is waived. Documentation is key here. Parental Leave Being on or about to take parental leave doesn’t mean you can’t qualify for a mortgage. As long as you have a letter from your employer guaranteeing your position and return-to-work date, lenders can use your regular salary—not your leave income—when assessing your application. Term Contracts This is one of the trickiest categories. Even highly skilled professionals with strong incomes can face challenges here. A term contract has a start and end date, which makes lenders question the stability of your future income. To use term-contract income, lenders generally want to see at least two years of history, or proof that your contract has already been renewed. The more evidence you can show of consistent employment, the stronger your case will be. The Bottom Line If you’re planning to apply for a mortgage, it’s important to understand how your employment status could affect your approval. Whether you’re starting a new job, coming back from leave, or working under contract, lenders want documentation that proves your income is reliable. 📞 If you’ve recently changed jobs or are planning a career shift, let’s connect. I can help you prepare your file so you qualify with confidence and avoid surprises in the approval process.

LET'S TALK

SABEENA BUBBER

MORTGAGE BROKER | AMP

Contact Us