One of the most frustrating parts about buying a home is the sheer amount of confusing vocabulary you have to understand. There’s much to learn, and if you’ve been in the beginning phase of getting pre-qualified for your mortgage then you may have heard terms like, Total Debt Service (TDS) and Gross Debt Service (GDS) get thrown around. If you don’t know what these terms mean or even how they could impact getting a mortgage, don’t fret! Below are the most important things you need to know about TDS, GDS, and how they affect the mortgage pre-approval process.

Why is it used?

Lenders want you to succeed, and they want to know that money borrowed is money returned. They need the assurance that they are lending money to a responsible party, and to discover this for themselves they have to determine the maximum amount you theoretically afford on your mortgage (this is where TDS and GDS come in). By knowing how much you earn per month, the maximum amount you can place on a down payment, your other debts, credit score, and the interest rates/terms you quality for, a lender can make a calculated decision regarding pre-qualification.


Calculating TDS and GDS

 You can find the formulas for calculating TDS and GDS on the Canada Mortgage and Housing Corporation’s (CMHC) website. They’re still listed below along with an explanation of each factor used in the formula.


Principal + Interest + Taxes + Heat

Gross annual income


 Principal + Interest + Taxes + Heat + Other debts

Gross annual income

Values and factors

The principal used is based the amortization period along with the loan amount (this includes the CMHC premium). The interest is based on a qualifying interest rate that is applicable to all loan types and is the greater of your contract mortgage rate while the tax factor merely includes the property tax amount. Finally, monthly heating costs are factored into GDS. If the home is a new construction and there is no heating record, the amount it will be is estimated via property size, type of heating system, and the location.

The sum of each factor is calculated then divided by your household’s gross annual income. If you have rental income, some of that can also be included in the gross annual income Divide, and the final number will be your GDS. It’s that easy!


The factors added are exactly the same, except ‘other debts.’ What is that, anyway? It’s vague, but CMHC explains that this includes any loans and credit card debt/lines of credit. To place a number value on revolving credit, state your monthly payment that’s at least 3% of your total debt; for secured lines of credit, state a monthly payment on the balance owed amortized over 25-years via the contract (benchmark rate if you do not know this). If this sounds confusing to you, please reach out to us and we’ll be more than happy to clear it up.

What if my GDS and TDS values are too high?

 If your lender informs you that your TDS and GDS values are too high, there are a couple of things you can do to lower them to a more suitable level. The first thing to do is to pay off your debts: credit cards, loans, etc. This will improve your credit score – a factor that plays a vital role in getting pre-approved for a home.

Need additional help? Reach out to us and let us fill you in on how to navigate GDS, TDS, and everything else related to the mortgage process. Call today, and let us help you to get pre-approved for that dream home!