Calculating your Debt Service Ratio2015-10-02 09:04:31 Posted By Jila Rezai
One of the ways lenders calculate how much they're willing to lend an applicant is by measuring how much of your monthly income will go toward paying off your debt, and your mortgage broker can help you calculate this.
Your gross debt service ratio (GDS) is the percentage of your gross monthly income that will go toward monthly housing payments, including mortgage payments (principal and interest), property taxes, heating expenses and, if applicable, half your condo fees. Most lenders will require your GDS to be no more than 32 per cent - in other words, your monthly housing costs should comprise no more than one-third of your monthly income.
Your total debt service ratio (TDS) includes not just your housing costs, but any other monthly debt obligations such as car loans, student loans or credit card balances. To satisfy most lenders, you'll need a TDS of 40% or less, though some lenders are as stringent as 37%.
Source: Mortgage Brokers Association of BC