How Much Will the Bank Lend? It Comes Down to Two Ratios: GDS and TDS, Explained
Lenders size your loan on two ratios — understand GDS / TDS and you can back-solve your budget and optimize before you apply
How does the bank decide how much I can borrow? What are GDS and TDS?
Lenders use two ratios to gauge whether you can carry a mortgage: GDS (Gross Debt Service) and TDS (Total Debt Service). GDS = your housing costs (mortgage principal & interest + property tax + heating + 50% of condo fees, if applicable) ÷ gross income; TDS = GDS plus your other debts (credit cards, lines of credit, car loans) ÷ gross income. Per CMHC, insured mortgages generally require GDS at or below 39% and TDS at or below 44%, and both must be calculated at the greater of contract rate + 2% or 5.25%.
Sources: CMHC / cmhc-schl.gc.ca (Calculating GDS/TDS, insured-mortgage 39%/44% limits); OSFI (qualifying rate, greater of contract + 2% or 5.25%); Bank of Canada (June 2026 policy rate 2.25%).
The question I get most is “how expensive a home can I actually buy?” The answer isn’t the price — it’s your two ratios, GDS and TDS. That’s exactly what lenders use to decide whether and how much to approve. Understand these two numbers and you can estimate your own budget and optimize it with intent before applying — here’s how they work, what they include, and how to use them.
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GDS: how much of your income housing eats
⚠️Car loans and card debt steal your buying budget. TDS counts every debt payment toward the 44% ceiling — a $600/month car loan can cut your approvable mortgage substantially. Clear high-payment consumer debt before buying.
TDS: now add in your other debts
ℹ️Rate backdrop: per the Bank of Canada, the June 2026 policy rate is 2.25%. But GDS/TDS are computed at the greater of contract + 2% or 5.25% — a stress-test threshold largely independent of today’s rate, and the one to use when estimating your budget.
The key detail: use the stress-test rate, not the contract rate
How to back-solve your budget
How to optimize: pay debt, add down payment, raise income
Frequently Asked Questions
What are the GDS and TDS limits?
Per CMHC, insured mortgages generally require GDS at or below 39% and TDS at or below 44%. Uninsured mortgages are set by each lender (often slightly more generous) but still centre on these ratios and must pass the OSFI stress test.
What’s included in GDS?
Mortgage principal & interest (P&I), property tax, heating, and 50% of condo fees for a condo. Add those and divide by gross income for GDS — and remember the mortgage portion is computed at the stress-test rate.
Why can’t I qualify even though my income is enough?
It’s likely TDS — your car loan, credit cards, and line-of-credit payments push total debt over 44%. Pay down high-payment debts first and TDS usually improves immediately.
Can I estimate my own borrowing limit?
Yes. Take gross monthly income × 39% for the housing-cost ceiling, subtract property tax/heating/condo fees for the P&I you can carry, convert it to principal at ~6% (stress-test rate), then re-check with TDS 44%. Both ratios must pass.
Arthur Zhao
Real Estate Broker · FRI · ABR · SRS · PSA · MCNE · E-PRO · GUILD Elite
VP & Branch Manager, Bay Street Group Inc.
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