GDS and TDS Ratios Explained for Mortgage Agent Students
Learn the difference between GDS and TDS, and practise choosing the right income and expense figures.
Mortgageprep.ca • Independent Level 1 study resources
Debt-service ratios help lenders assess whether a borrower can reasonably carry housing expenses and existing obligations. As a mortgage student, learn both the calculation and what belongs in each set of costs. A ratio is a screening input, not a guarantee that a loan will be approved.
Gross Debt Service (GDS)
GDS compares qualifying housing costs with gross income. In a simplified example, housing costs may include the qualifying mortgage payment, property taxes, heat and an applicable portion of condominium fees. The lender's actual rules determine which amounts to include and which qualifying rate is used.
GDS = qualifying monthly housing costs ÷ gross monthly income × 100.
Worked example: monthly gross income is $8,000 and qualifying housing costs total $2,800. GDS = 2,800 ÷ 8,000 × 100 = 35%. Do not use after-tax income unless the question explicitly calls for a different metric.
Total Debt Service (TDS)
TDS broadens the numerator to include applicable other debt obligations. A borrower may have a manageable housing payment but also car payments, credit commitments or other liabilities. TDS helps make that broader financial picture visible.
TDS = (qualifying housing costs + qualifying other debt payments) ÷ gross monthly income × 100.
Using the example above, add $600 of qualifying monthly debt obligations. TDS = (2,800 + 600) ÷ 8,000 × 100 = 42.5%. GDS remains 35%; TDS captures more of the borrower's commitments.
Common calculation traps
- Using net income: these conventional examples use gross income.
- Mixing periods: convert annual taxes to monthly amounts before adding them.
- Forgetting housing components: qualifying taxes and heating costs can matter.
- Ignoring other debt: TDS includes more than the mortgage expense.
- Assuming universal limits: lender programs and regulatory requirements may differ.
Use ratios as part of a full file review
Approval may also depend on credit, income stability, down payment, collateral, property type, documentation and product policy. A strong exam-prep question may include a ratio calculation and ask what further evidence is required. Apply professional judgment rather than treating a single percentage as the entire decision.
Try our GDS/TDS calculator with new numbers, then use free practice questions to check your reasoning.