# QUESTION: How do lenders assess rental income?

> Lenders meticulously verify rental income as a crucial component of a borrower's capacity to repay.

Category: Investor
Last verified: 2026-02-18
Source: https://ratellow.com/faqs/investor/question-how-do-lenders-assess-rental-income

## Answer
To determine debt serviceability, lenders often use Gross Debt Service (GDS) and Total Debt Service (TDS) ratios. These ratios compare a borrower's income to their debt obligations. It's a financial health check!

Here's a breakdown of these key ratios:

| Ratio | Calculation | Description | Example | 
|---|---|---|---| 
| **GDS (Gross Debt Service)** | (Mortgage Payments + Property Taxes + Heating Costs + Condo Fees) / Gross Income | Measures the percentage of gross income used for housing costs. | Maximum GDS typically around 39% | 
| **TDS (Total Debt Service)** | (Total Debt Payments, including Mortgage, Loans, Credit Cards) / Gross Income | Measures the percentage of gross income used for all debt obligations. | Maximum TDS typically around 44% | 

For example, a $500,000 mortgage can become much easier to manage with even a modest amount of verified rental income, as it directly improves these ratios, increasing the likelihood of approval. Every bit counts!

## Institutional highlights
- Lenders need to confirm your income carefully, looking at your job and income history.
- You'll need to provide proof of income that's hard to fake, like tax returns or rental agreements.
- Lenders will carefully review your application if you're counting on rental income to qualify for a mortgage.
- Lenders use ratios to see if you can afford your mortgage payments and other debts.
- Your ability to repay your mortgage is tested against higher interest rates or unexpected financial changes.

## Related guide
- https://ratellow.com/guides/rental-income-offsets

## Sources
- Property value used for the LTV ratio — https://www.osfi-bsif.gc.ca/en/guidance/guidance-library/residential-mortgage-underwriting-practices-procedures-guideline-2017
- Guarantors and co-signors of mortgages — https://www.osfi-bsif.gc.ca/en/guidance/guidance-library/residential-mortgage-underwriting-practices-procedures-guideline-2017#2.3.2
- Footnotes — https://www.osfi-bsif.gc.ca/en/guidance/guidance-library/capital-adequacy-requirements-car-guideline-2026