Gross Debt Servicing Ratio (GDS) for Ontario Mortgages – Explained
If you’re planning to buy a home in Ontario, understanding the Gross Debt Servicing Ratio (GDS) is a crucial step. This financial metric plays a key role in determining whether you qualify for a mortgage — and how much you can borrow. But what exactly is GDS, how is it calculated, and why does it matter so much to lenders?
This guide will walk you through everything you need to know about GDS in the Ontario mortgage process.
What Is Gross Debt Servicing Ratio (GDS)?
The Gross Debt Servicing Ratio (GDS) is a financial calculation that compares your housing-related expenses to your gross (before-tax) income. In simple terms, it shows what portion of your income would be used to cover basic housing costs.
These housing costs typically include:
Mortgage principal and interest
Property taxes
Heating expenses
Half of condo fees (if applicable)
The GDS ratio helps lenders assess how much of your income is already committed to housing, which is a strong indicator of your ability to handle monthly mortgage payments.
Why Does GDS Matter for Mortgages in Ontario?
In Canada — and specifically in Ontario — mortgage lenders use both the GDS and the Total Debt Servicing (TDS) ratio to determine mortgage affordability. These ratios are key components in qualifying for both insured and uninsured mortgages.
GDS measures housing costs only
TDS includes all debt payments (credit cards, car loans, lines of credit, etc.)
Lenders want to make sure that borrowers are not overextending themselves. If your GDS is too high, it’s a red flag that you may struggle to keep up with payments, especially if interest rates rise or your income changes.
What Is the Maximum GDS Ratio in Ontario?
According to Canada Mortgage and Housing Corporation (CMHC) guidelines, the maximum GDS ratio for most insured mortgages is 39%. However, lenders often prefer borrowers to stay under 32–35% for conventional loans.
Here's a breakdown:
GDS Ratio Category
Interpretation
Under 32%
Excellent
32%–35%
Acceptable
35%–39%
Risk zone (may still qualify)
Over 39%
Likely to be denied or require mitigation
Note: These thresholds assume you also meet a maximum TDS ratio of 44%.
How to Calculate Your GDS Ratio
To calculate your GDS, use the following formula:
GDS = (Housing Costs ÷ Gross Monthly Income) × 100
Example:
Let’s say you earn $6,000/month before taxes, and your housing costs break down as follows:
Mortgage: $1,800
Property Taxes: $300
Heating: $100
Condo Fees (if applicable): $100 → Counted as $50 in GDS
Total housing costs = $2,250
Now calculate:
GDS = ($2,250 ÷ $6,000) × 100 = 37.5%
In this case, your GDS is 37.5%, which might be acceptable to some lenders but could limit your mortgage options — especially if your TDS ratio is also high.
How Do Lenders Use GDS in Ontario?
When you apply for a mortgage with a lender or broker in Ontario, your GDS ratio is one of the first figures they calculate. They’ll ask for documentation like:
Recent pay stubs or proof of income
T4s or Notice of Assessment (for self-employed)
Property tax estimates for your target home
Heating cost averages (often based on local rates)
Many lenders use automated underwriting tools that plug in this data and instantly determine your GDS and TDS scores.
How to Lower Your GDS Ratio (and Increase Affordability)
If your GDS is too high, here are some common strategies to bring it down:
Increase your down payment – This reduces the size of your mortgage and monthly payments.
Choose a less expensive property – Staying below your means can dramatically improve your GDS.
Extend your amortization period – A 30-year mortgage will have lower monthly payments than a 25-year one, though you’ll pay more interest over time.
Eliminate or reduce condo fees – These can significantly inflate your GDS ratio.
Consider a co-signer or joint mortgage – A second income can improve the affordability calculation.
Pay down other debts – While this affects TDS more, it may give you leverage with your lender.
GDS vs. TDS: What’s the Difference?
While the GDS focuses on housing-related costs, the Total Debt Servicing (TDS) ratio includes all your debt obligations.
TDS Formula:
TDS = ((Housing Costs + Other Debts) ÷ Gross Monthly Income) × 100
Examples of “other debts”:
Car loan payments
Student loans
Credit card minimum payments
Personal or payday loans
Most lenders want your TDS ratio to stay below 44%, though lower is always better. Even if your GDS is within range, a high TDS can disqualify you.
Tools to Help You Estimate GDS in Ontario
Before applying for a mortgage, it’s wise to crunch the numbers and see where your Gross Debt Servicing Ratio (GDS) stands.
A helpful place to start is with the WealthTrack Mortgage Affordability Calculator.
This free online tool lets you input your income, estimated mortgage payments, property taxes, heating costs, and more to determine how much house you can comfortably afford based on your GDS.
It’s tailored for Canadian homebuyers and gives you a clear picture of your financial boundaries before you begin the house hunt.
Final Thoughts: Why GDS Matters
The Gross Debt Servicing Ratio may sound like a dry financial metric, but it plays a major role in your ability to qualify for a mortgage in Ontario. Understanding how it's calculated, what affects it, and how to improve it can mean the difference between getting approved or turned down.
If you’re a first-time homebuyer, investor, or simply shopping for your next home, take the time to calculate your GDS and know where you stand. Better yet, speak with a local mortgage broker or financial advisor who understands the Ontario market.
Need help figuring out your GDS ratio or finding a mortgage that fits your income? Book a call today!
