Glossary
Total Debt Service Ratio (TDS)
The Total Debt Service Ratio (TDS) is the share of gross income that goes toward all debt payments, capped at 44% by most Canadian lenders..
The Total Debt Service Ratio (TDS) is the share of your gross household income that lenders calculate goes toward all debt payments — the mortgage you are applying for plus property taxes, heating, and every other debt you carry, such as car loans, credit cards, and student loans. It is expressed as a percentage and is measured before income tax is deducted.
How TDS differs from GDS
TDS adds housing costs to every other recurring debt payment and divides the total by gross household income. Its companion, the Gross Debt Service Ratio (GDS), counts housing costs only. Lenders review both before approving a mortgage, and the GDS and TDS guide explains how the two work together.
| Monthly payment | Counts in GDS | Counts in TDS |
|---|---|---|
| Mortgage principal and interest | Yes | Yes |
| Property tax and heating | Yes | Yes |
| Condo or strata fees (typically half) | Yes | Yes |
| Car loans, credit cards, student loans, other credit | No | Yes |
Lenders generally use the minimum required payment on revolving debts rather than the full balance, and for lines of credit many count a percentage of the approved limit. Ask each lender how it treats those balances, because the treatment changes the ratio.
Why the 44% ceiling matters
Most Canadian lenders cap TDS at 44% of gross income, and housing costs alone are typically capped lower than that. Federally regulated lenders must also apply the mortgage stress test, which qualifies a borrower at the greater of the contract rate plus two percentage points or a published floor rate. In practice, that means your TDS is tested against a higher assumed payment than the one you would actually sign for, so the amount you qualify for can be lower than the payment you could comfortably carry. Mortgages that require mortgage default insurance follow the same style of limits, because insurers and OSFI Guideline B-20 set the underwriting rules that lenders must follow.
Why it matters to borrowers
Because TDS counts every debt, a car loan or a revolving credit balance can shrink the mortgage you qualify for even when your income has not changed. Paying down or closing those debts before you apply can lower the ratio, and running the numbers first with a mortgage affordability calculator shows how the housing payment and your other debts interact. Lenders may consider exceptions to the published caps for strong files, but the ratio remains one of the main tests of how much you can borrow.
Frequently asked questions
What is the difference between GDS and TDS?
GDS measures housing costs only — mortgage principal and interest, property tax, heating, and typically half of condo fees — as a share of gross income. TDS measures those same housing costs plus all your other debt payments, such as car loans, credit cards, and student loans. Lenders review both, and TDS is usually the stricter of the two.
Can I qualify for a mortgage if my TDS is above 44%?
The 44% figure is the ceiling most federally regulated lenders use, but it is not an absolute rule. Some lenders consider exceptions for borrowers with strong credit, savings, or other compensating factors, and alternative or private lenders set their own limits, often at higher rates. Qualifying is never guaranteed, so confirm the policy with the lender or broker.
Does a car loan affect my mortgage approval?
Yes. Car loan payments count toward your TDS but not your GDS, so they reduce the mortgage amount you can qualify for. A large remaining balance can matter if the loan is close to being paid off, since lenders look at the payment they must include. Paying down instalment debt before applying typically improves the ratio.
Sources
Related terms
- Gross Debt Service Ratio (GDS) — The share of gross household income that goes to housing costs — mortgage principal and interest, property taxes, heating, and half of condo fees — commonly capped at 39%.
- Mortgage Stress Test — The federal mortgage stress test is a qualification rule that makes lenders check whether you could afford your mortgage if rates were higher than your contract rate.
- Debt Service Ratio — A measure comparing your housing and other debt payments with your income, used by Canadian lenders when deciding whether you qualify for a mortgage.
- Exception — An exception is a lender’s case-by-case allowance for a strong applicant to exceed a standard mortgage qualification rule.
- Mortgage Pre-Approval — A mortgage pre-approval is a lender's conditional commitment to lend a set amount at a held rate, subject to verifying your income, debts and the property.