ExamPassGDS and TDS Calculator
GDS (gross debt service) is a buyer's yearly housing costs (mortgage payments, property taxes and usually heat, plus half of any condominium fees) divided by gross household income. TDS (total debt service) adds every other debt payment. For insured homeowner mortgages, CMHC's maximums are 39% GDS and 44% TDS. Enter the figures below to test both ratios, see which one limits the loan, and work back to the largest mortgage the buyer can carry.
Enter a monthly payment to test the ratios, or open "Largest mortgage" to size one.
How are GDS and TDS calculated?
| Ratio | Formula |
|---|---|
| GDS | (mortgage payments + property taxes + heat + 50% of condo fees) ÷ gross annual income |
| TDS | (everything in GDS + all other debt payments) ÷ gross annual income |
Use yearly figures throughout: monthly payments × 12. Other debts include car loans, student loans, credit card payments and lines of credit.
Which limits? CMHC publishes maximums of 39% GDS and 44% TDS for its homeowner purchase loans. Lenders set their own limits within the insurer's rules, and conventional mortgages can use different ones. The course's worked examples use lower limits, in the range of 27% to 32% GDS and 37% to 40% TDS. On the exam, always use the limit the question gives you. The calculator lets you test against CMHC's limits, the course's 32% and 40%, or your own.
Working backward. Multiply income by the limit, take off the taxes, heat, half the condo fees and (for TDS) the other debts, and divide by 12. That is the largest monthly payment the ratio allows. The lower of the GDS and TDS results governs. Add a rate and amortization and the calculator turns that payment into a mortgage amount.
Qualifying rate. Lenders usually test affordability at a qualifying rate above the contract rate. Open "Largest mortgage this buyer can carry," enter that rate with the amortization, and the calculator sizes the mortgage the ratios allow at the qualifying rate.
Worked example: a Burlington condo
The Okafors earn $126,000 a year. Their mortgage payment would be $3,032.60 a month. Property taxes are $3,900 a year, heat is included in the condo fees of $640 a month, and they pay $400 a month on a car loan.
| Step | Working | Result |
|---|---|---|
| Mortgage payments | $3,032.60 × 12 | $36,391.20 |
| Property taxes | $3,900.00 | |
| Half the condo fees | $640 × 12 × 50% | $3,840.00 |
| Housing costs | total | $44,131.20 |
| GDS | $44,131.20 ÷ $126,000 | 35.02% |
| Other debts | $400 × 12 | $4,800.00 |
| TDS | $48,931.20 ÷ $126,000 | 38.83% |
Against CMHC's limits, they pass both. Against the course's 32% GDS, they fail GDS even though TDS is under 40%. Leave out the condo fees and GDS looks like 31.98%, a pass: that is why the fees matter.
Frequently asked questions
Is heat always included in GDS?
Often, but it depends on the lender. The calculator has a "Lender counts heat" switch. When a question gives a heating cost, include it unless the question says not to.
Why only half the condominium fees?
Lenders usually count 50% of the fees, because part of the fee covers costs a freehold owner pays separately. The course teaches it that way; lender policies vary.
Does passing GDS and TDS mean the buyer is approved?
No. Credit, the property, the down payment and the qualifying rate all matter. Only a written mortgage commitment means the money is there, which is why a buyer should not waive a financing condition on a pre-approval alone. See waiver vs notice of fulfilment.