Resources - GDS & TDS Ratios
Lenders and insurers will look at two calculations are part of the analysis on a mortgage application. The first is the Gross Debt Servicing ratio (GDS). This calcualtion looks at the carrying cost of the property relative to your income. The carry costs are the mortgage payment, the property taxes, heating costs and if applicable 50% of the condo fees. Most lenders will determine the heating costs using a flat $1200 per year for properties with a square fottage of less than 2000 and a heating costs factor of 0.60 x square footage for properties over 2000 sqaure feet. The maximum the GDS should be is 35% or 39% with strong credit scores for all applicants.

GDS = Annual mortgage payment + Annual Property Taxes + Annual Heating Cost + 50% of Condo Fees 
____________________________________________________________________________   X 100
 Annual Gross Income

The Total Debt Servicing ratio is the second calculation that lenders look at. Like the GDS, the TDS ratio looks at the carrying costs relative to income but also includes other debt payments like credit cards, loans, vehicle leases, lines of credits, and with some lenders cell phone payments.
Debts are categorized into four categories: Revolving, Installment, Open & Mortgage. Credit cards and line of credits are revolving credit, loans are installment credit and cellular phones are considered open credit (no credit limit, full blanace is due monthly). Lenders will typically use 3% of the outstanding balance on revolving and open debt for the TDS calculation and the monthly payment as reported on the credit bureau for installment credit. Some lenders may use 3% of the total limit for revolving credit.  The maximum the TDS should be is 42% or 44% with strong credit scores for all applicants.

TDS = Annual mortgage payment + Annual Property Taxes + Annual Heating Cost + 50% of Condo Fees + Annualized Debt payments
__________________________________________________________________________________________________ X 100
Annual Gross Income
Please note: Appreoved Lending Centres has access to lenders that will consider GDS and TDS ratios higher than the industry standard. For more information contact us today for an appointment.