# How are debt service ratios calculated, and why are they important?

> Debt service ratios, namely the Gross Debt Service Ratio (GDSR) and Total Debt Service Ratio (TDSR), are vital in gauging a borrower's ability to manage mortgage debt.

Category: Purchasing
Last verified: 2026-02-18
Source: https://ratellow.com/faqs/purchasing/how-are-debt-service-ratios-calculated-and-why-are-they-important

## Answer
Debt service ratios, namely the Gross Debt Service Ratio (GDSR) and Total Debt Service Ratio (TDSR), are vital in gauging a borrower's ability to manage mortgage debt. The GDS ratio measures the percentage of gross monthly income needed for housing costs, while the TDS ratio accounts for all debt obligations. Lenders stress-test mortgage affordability to ensure borrowers can manage rate fluctuations. Here's an example stress test:

## Institutional highlights
- Lenders use debt ratios to make sure you can comfortably afford your mortgage payments.
- To check affordability, lenders use either your mortgage interest rate plus 2%, or 5.25%, whichever is higher.
- Your property taxes and condo fees are included when the lender calculates how much you can afford.
- Heating costs are factored into your affordability assessment, and these costs can vary depending on where you live.

## Related guide
- https://ratellow.com/guides/closing-costs-canada

## Sources
- Contents — https://www.sagen.ca/ups/underwriting-documentation/#documentation
- Footnotes — https://www.osfi-bsif.gc.ca/en/guidance/guidance-library/osfi-exempts-uninsured-mortgage-straight-switches-prescribed-mqr-implements-portfolio-lti-limits
- Property value used for the LTV ratio — https://www.osfi-bsif.gc.ca/en/guidance/guidance-library/residential-mortgage-underwriting-practices-procedures-guideline-2017
- Page 2 — https://assets.cmhc-schl.gc.ca/sf/project/cmhc/pdfs/factsheets/new/cmhc-quick-reference.pdf#page=2