What is Mortgage Debt Servicing?

When it comes to getting a mortgage in Canada, debt servicing and debt ratios are a huge factor in determining how much mortgage you qualify for. Let's take the overwhelm out of debt ratios and help you qualify for more!

Debt servicing for a mortgage in Canada refers to calculating how much of your, the borrower's, income is used to cover your housing costs and other debt payments. Mortgage lenders use two main debt servicing ratios, Gross Debt Service and Total Debt Service, to assess how much mortgage you can afford.

1. Gross Debt Service (GDS) Ratio

The Gross Debt Service Ratio measures the percentage of your gross monthly household income (before tax income) that can go toward your housing costs, including:

• A stress-tested monthly principal and interest mortgage payment
• Property taxes
• Heating costs
• 50% of condo fees (if applicable)

✅The general rule of thumb is that 39% of your gross monthly household income can go towards your housing costs.

2. Total Debt Service (TDS) Ratio

The Total Debt Service Ratio measures the percentage of your gross monthly household income (before tax income) that can go toward your housing costs plus any other monthly debt obligations that you may have, such as:

• Balances on credit cards
• Car loans or leases
• Balances on lines of credit
• Student loans
• Personal loans
• Monthly support payment

✅ The maximum total debt service ratio is typically 44%.

Why do your GDS and TDS Matter?

Your debt servicing ratios determine:

• How much you can borrow
• Your mortgage approval
• Your affordability range

They’re especially important under the mortgage stress test, which requires borrowers to qualify at the greater of the contract rate + 2% OR the Bank of Canada's qualifying rate (currently 5.25%)

Every dollar matters when it comes to your debt servicing ratios and your mortgage qualifications.

Debt servicing ratios can feel overwhelming—but you don’t have to figure them out alone. Let’s simplify the process and make homeownership a reality for you. Message me or book a complimentary 15-minute call to learn more!