How to calculate Total Service Ratio

To calculate your Total debt service ratio, the lender will take the same GDS calculation but add in any other monthly payments you might have to make, including loans or the minimum payments on any credit card debt. So, the lender adds together your mortgage payments, property taxes, heating costs, 50% of your condo fees and debts, and divides the total by your gross annual income. If the answer equals less than 40 per cent (industry standard), the lender will know you have the money to make all of your monthly payments and you will be on track with getting approved for a mortgage.

Calculation of debt service ratio 

GDS RATIO (Gross Debt Service Ratio):

The percentage of gross annual income required to cover payments associated with housing. Payments include mortgage principal, interest, property taxes and sometimes include secondary financing, heating, condominium fees or pad rent.

TDS RATIO (Total debt service ratio):

The percentage of gross annual income required to cover payments associated with housing and all other debts and obligations, such as car loans and credit cards.

Example – GDS – Gross Debt Service Ratio

Monthly mortgage payment:
(principal and interest)*
$1,191.84
Property taxes: (monthly) $150.00
Heating costs: (monthly) $105.00
Other:** $50.00
Total monthly payments: $1,496.84
Gross monthly household income: $6,000.00
GDS = Total monthly payments  (x 100)
Gross monthly income
GDS = $1,496.84  (x 100) = 24.95%
$6,000.00

* Principal and interest must be based on the total insured loan amount, including CMHC insurance premium (if you choose to add the premium to your mortgage and not to pay the premium up front).  Mortgage payment is based on a $200,000 mortgage, 5.25% interest rate, 25 year amortization.

** If you are purchasing a condominium, you must include 50% of the monthly condominium fee.  If the mortgage is for a mobile home (chattel mortgage) include 100% of the monthly site (pad) rent.

Example – TDS – Total Debt Service Ratio

Total monthly housing payments:
(from GDS calculation):*
$1,496.84
Other debts:
(personal loans, car loans, credit cards, etc.):
$350.00
Total monthly debts: $1,846.84
Gross monthly household income: $6,000.00
TDS = Total monthly payments  (x 100)
Gross monthly income
TDS = $1,846.84  (x 100) = 30.78%
$6,000.00

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