Debt-to-Income Ratio Calculator (GDS & TDS) Canada

What the debt to income ratio calculator does

The calculator shows the two numbers a Canadian mortgage lender cares about most: your gross debt service (GDS) ratio and your total debt service (TDS) ratio. Together they measure how much of your income is already committed to housing and debt, and so how much room is left for a mortgage payment.

Knowing them before you apply shows where you stand against lenders’ guidelines, so you can adjust your plans if the numbers are tight.

How GDS and TDS are calculated

Both ratios compare regular costs with gross, pre-tax income. GDS is annual housing costs divided by gross annual income. TDS is annual housing costs plus other debt payments, divided by the same income.

Housing costs follow the standard Canadian convention:

• Mortgage or rent payment
• Property tax
• Heating
• Half of any condo or strata fees

Other debts in the TDS ratio include car loans, lines of credit, student loans, credit card minimum payments and support obligations. The calculator annualizes your monthly costs, divides by gross income and reports each ratio, along with your monthly gross income and where it goes.

A worked example

A household earns $100,000 a year before tax. Its mortgage payment is $2,000 a month, property tax $350 and heating $150, so housing costs $2,500 a month. It also pays $500 a month on a car loan.

GDS is $2,500 × 12 ÷ $100,000 = 30%. TDS adds the car payment: ($2,500 + $500) × 12 ÷ $100,000 = 36%. Both are below the 39% and 44% guidelines, so this household has some room to borrow.

If the car payment were larger, or a card balance were added, GDS would not move, because it only counts housing, but TDS would climb toward its limit. That is why lenders use two ratios, and why paying down a car loan or card is often the fastest way to free up mortgage room.

Reading your result

A GDS below about 39% and a TDS below about 44% are the traditional comfort zones. Under those levels, a lender is more likely to approve the mortgage you want. Above them, you may need a larger down payment, a lower price, or time to pay down other debts.

The chart shows how much of each month’s income housing and other debts take. Two households with the same TDS ratio can feel very different depending on their actual incomes, which is why the ratios are a screen rather than the whole picture.

Why lenders use two ratios

GDS alone could make a borrower look affordable while hiding a lot of consumer debt. TDS captures every regular obligation, so a borrower who passes GDS easily can still fail TDS because of car payments and card balances, which is the risk lenders want to catch.

The stress test

Borrowers at federally regulated lenders must also pass the mortgage stress test: they qualify at the higher of a minimum qualifying rate or their contract rate plus a buffer. Your GDS and TDS are therefore tested against a payment larger than the one you will actually make, which is why a household can pass at its real rate and still be declined. Mortgages with less than 20% down need default insurance from CMHC or a private insurer, which applies its own view of the limits. Keeping your ratios comfortably below the guidelines gives you room for the stress test.

How to improve your ratios

• Pay down consumer debt. Clearing a car loan or card balance lowers TDS directly.
• Increase your down payment. A smaller mortgage means lower housing costs.
• Extend the amortization. A longer term reduces the monthly payment, though it raises total interest.
• Add a co-borrower. A second qualifying income raises the income side of both ratios.
• Choose a less expensive home.

Common mistakes to avoid

• Using net income. Both ratios use gross income; take-home pay makes a mortgage look more affordable than it is to a lender.
• Counting all condo fees. Only half of condo or strata fees count toward housing costs.
• Leaving out debts. Car loans, lines of credit, student loans, card minimums and support payments all belong in TDS.
• Treating the limits as a budget. Passing GDS and TDS means a lender may approve you, not that the payment will feel comfortable once savings, child care and surprises are counted.

Things to keep in mind

These ratios are a lender’s affordability screen, not a personal budget, and many planners suggest staying well below the maximum limits. Guideline limits and the minimum qualifying rate shift with policy and lender appetite, so confirm the current figures with your lender or mortgage broker before you make an offer.

This article is general information only and not financial advice.

About This Tool: Debt to Income Ratio Calculator Canada

Debt to income ratio calculator Canada: use this tool to get an instant estimate based on the figures you enter. Adjust the inputs above to match your situation, or browse all our calculators to plan your next step.