Mortgage Approval 101: GDS & TDS Explained

Jeff Johnson • September 10, 2025

Can You Afford That Mortgage? Let’s Talk About Debt Service Ratios

One of the biggest factors lenders look at when deciding whether you qualify for a mortgage is something called your debt service ratios. It’s a financial check-up to make sure you can handle the payments—not just for your new home, but for everything else you owe as well.


If you’d rather skip the math and have someone walk through this with you, that’s what I’m here for. But if you like to understand how things work behind the scenes, keep reading. We’re going to break down what these ratios are, how to calculate them, and why they matter when it comes to getting approved.


What Are Debt Service Ratios?

Debt service ratios measure your ability to manage your financial obligations based on your income. There are two key ratios lenders care about:

  1. Gross Debt Service (GDS)
    This looks at the percentage of your income that would go toward housing expenses only.

   2. Total Debt Service (TDS)
       This includes your housing costs plus all other debt payments—car loans, credit cards, student loans, support payments, etc.


How to Calculate GDS and TDS

Let’s break down the formulas.


GDS Formula:

(P + I + T + H + Condo Fees*) ÷ Gross Monthly Income


Where:

P = Principal

I = Interest

T = Property Taxes

H = Heat


Condo fees are usually calculated at 50% of the total amount


TDS Formula:

(GDS + Monthly Debt Payments) ÷ Gross Monthly Income


These ratios tell lenders if your budget is already stretched too thin—or if you’ve got room to safely take on a mortgage.


How High Is Too High?


Most lenders follow maximum thresholds, especially for insured (high-ratio) mortgages.

As of now, those limits are typically:

GDS: Max 39%

TDS: Max 44%


Go above those numbers and your application could be declined, regardless of how confident you feel about your ability to manage the payments.


Real-World Example

Let’s say you’re earning $90,000 a year, or $7,500 a month.

You find a home you love, and the monthly housing costs (mortgage payment, property tax, heat) total $1,700/month.


GDS = $1,700 ÷ $7,500 = 22.7%


You’re well under the 39% cap—so far, so good.


Now factor in your other monthly obligations:

  • Car loan: $300
  • Child support: $500
  • Credit card/line of credit payments: $700
    Total other debt = $1,500/month


Now add that to the $1,700 in housing costs:
TDS = $3,200 ÷ $7,500 = 42.7%


Uh oh. Even though your GDS looks great, your TDS is just over the 42% limit. That could put your mortgage approval at risk—even if you’re paying similar or higher rent now.


What Can You Do?

In cases like this, small adjustments can make a big difference:

  • Consolidate or restructure your debts to lower monthly payments
  • Reallocate part of your down payment to reduce high-interest debt
  • Add a co-applicant to increase qualifying income
  • Wait and build savings or credit strength before applying


This is where working with an experienced mortgage professional pays off. We can look at your entire financial picture and help you make strategic moves to qualify confidently.


Don’t Leave It to Chance

Everyone’s situation is different, and debt service ratios aren’t something you want to guess at. The earlier you start the conversation, the more time you’ll have to improve your numbers and boost your chances of approval.


If you're wondering how much home you can afford—or want help analyzing your own GDS and TDS—let’s connect. I’d be happy to walk through your numbers and help you build a solid mortgage strategy.


Jeff Johnson

Mortgage Expert

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Everything You Need to Know About Mortgage Financing in Canada

By Jeff Johnson • February 25, 2026
For most Canadians, buying a home isn’t possible without a mortgage. And while getting a mortgage may seem straightforward—borrow money, buy a home, pay it back—it’s the details that make the difference. Understanding how mortgages work (and what to watch out for) is key to keeping your borrowing costs as low as possible. The Basics: How a Mortgage Works A mortgage is a loan secured against your property. You agree to pay it back over an amortization period (often 25 years), divided into shorter terms (ranging from 6 months to 10 years). Each term comes with its own interest rate and rules. While the interest rate is important, it’s not the only thing that determines the true cost of your mortgage. Features, penalties, and flexibility all play a role—and sometimes a slightly higher rate can save you thousands in the long run. Key Questions to Ask Before Choosing a Mortgage How long will you stay in the property? Your timeframe helps determine the right term length and product. Do you need flexibility to move? If a work transfer or lifestyle change is possible, portability may be important. What are the penalties for breaking the mortgage early? This is one of the biggest factors in the real cost of borrowing. A low rate won’t save you if breaking costs you tens of thousands. How are penalties calculated? Some lenders use more borrower-friendly formulas than others. It’s not easy to calculate yourself—get professional help. Can you make extra payments? Prepayment privileges allow you to pay off your mortgage faster, potentially saving years of interest. How is the mortgage registered on title? Some registrations (like collateral charges) can limit your ability to switch lenders at renewal without extra costs. Which type of mortgage fits best? Fixed, variable, HELOCs, or even reverse mortgages each have their place depending on your financial and life situation. What’s your down payment? A larger down payment could reduce or eliminate mortgage insurance premiums, saving thousands upfront. Why the Lowest Rate Isn’t Always the Best Choice It’s tempting to chase the lowest rate, but mortgages with rock-bottom pricing often come with restrictive terms. For example, saving 0.10% on your rate may put a few extra dollars in your pocket each month, but if the mortgage has harsh penalties, you could end up paying thousands more if you break it early. The goal isn’t just the lowest rate—it’s the lowest overall cost of borrowing . That’s why it’s so important to look beyond the headline number and consider the whole picture. The Bottom Line Mortgage financing in Canada is about more than rate shopping. It’s about aligning your mortgage with your financial goals, lifestyle, and future plans. The best way to do that is to work with an independent mortgage professional who can walk you through the fine print and help you secure the product that truly keeps your costs low. If you’d like to explore your options—or review your current mortgage to see if it’s really working in your favour—let’s connect. I’d be happy to help.

Tips to Pay Off Your Mortgage Early

By Jeff Johnson • February 18, 2026
Owning a home feels great—carrying a large mortgage, not so much. The good news? With the right strategies, you can shorten your amortization, save thousands in interest, and become mortgage-free sooner than you think. Here are four proven ways to make it happen: 1. Switch to Accelerated Payments One of the simplest ways to reduce your mortgage faster is by moving from monthly payments to accelerated bi-weekly payments . Instead of 12 monthly payments a year, you’ll make 26 half-payments. That works out to the equivalent of one extra monthly payment each year, shaving years off your mortgage—often without you noticing much difference in your budget. 2. Increase Your Regular Payments Most mortgages allow you to boost your regular payment by 10–25%. Some even let you double up payments occasionally. Every extra dollar goes directly toward your principal, which means less interest and faster progress toward paying off your balance. 3. Make Lump-Sum Payments Depending on your lender, you may be able to make lump-sum payments of 10–25% of your original mortgage balance each year. This option is ideal if you receive a bonus, inheritance, or other windfall. Applying a lump sum directly to your principal immediately reduces the interest charged for the rest of your term. 4. Review Your Mortgage Annually It’s easy to put your mortgage on auto-pilot, but a yearly review keeps you in control. By sitting down with an independent mortgage professional, you can check if refinancing, restructuring, or adjusting terms could save you money. A quick annual review helps ensure your mortgage is always working for you—not against you. The Bottom Line Paying off your mortgage early doesn’t require a massive lifestyle change—it’s about making smart, consistent choices. Whether it’s accelerated payments, lump sums, or regular reviews, every step you take helps reduce your debt faster. If you’d like to explore strategies tailored to your situation—or want a free annual mortgage review—let’s connect. I’d be happy to help you find the fastest path to mortgage freedom.