Qualification ratio that measures housing costs against gross income in Canadian underwriting.
Gross debt service ratio, or GDS, measures how much of a borrower’s gross income goes toward housing costs. It is one of the key affordability tests in Canadian mortgage underwriting.
GDS helps lenders decide whether the housing cost is reasonable relative to income. A borrower can have a strong credit profile and still fail the file if the projected housing cost is too large for the income shown.
GDS usually looks at the qualifying mortgage payment plus key housing expenses such as property taxes, heating, and in some cases part of condo fees. The result is expressed as a percentage of gross household income.
The exact threshold depends on the lender, insurer, product type, and overall file strength. That is why GDS is best understood as a ratio framework, not as one universal pass-fail number.
$$ \text{GDS} = \frac{\text{Housing Costs}}{\text{Gross Monthly Income}} \times 100% $$
On many Canadian files, “housing costs” means the qualifying mortgage payment plus:
| Item | Usually counted in GDS? | Why it matters |
|---|---|---|
| Qualifying mortgage payment | Yes | This is usually the biggest component. |
| Property taxes | Yes | Taxes are treated as a core housing cost. |
| Heating | Yes | Lenders commonly include a heating estimate or actual figure. |
| Condo fees | Sometimes partly | A lender may include only a portion, often 50%. |
| Car loan payment | No | This belongs in TDS, not GDS. |
| Credit card minimum payment | No | This is a non-housing debt for TDS. |
Suppose a household has gross monthly income of $10,000. The lender uses:
That gives housing costs of $3,900, so the ratio is:
$$ \text{GDS} = \frac{3{,}900}{10{,}000} \times 100% = 39% $$
If the lender’s acceptable range is below that result, the borrower may need a lower purchase price, larger down payment, or stronger income support.
GDS is not the same as total debt service ratio. TDS adds other debt obligations beyond housing costs.
Borrowers also sometimes think GDS uses only the real contract payment. In a stress-test context, the lender may use a higher qualifying payment instead.
How income is counted and which expenses are included can vary by lender, insurer, and file type. Self-employed and variable-income files often need extra underwriting judgment.