How do GDS and TDS ratios affect my refinancing options?
GDS (Gross Debt Service) and TDS (Total Debt Service) ratios are critical affordability indicators that financial institutions use to determine your eligibility for refinancing.
Key Points
When you refinance, lenders look at your income and debts conservatively, planning for different financial situations and potentially higher interest rates.
If your mortgage is insured, the lender must follow the insurer's rules about how much debt you can handle.
For uninsured mortgages, lenders will carefully assess your ability to repay, considering current and future financial conditions.
To qualify for refinancing without insurance, you'll generally need to qualify at your mortgage interest rate plus a buffer, or a set minimum qualifying rate, whichever is higher.
Lenders have specific guidelines on how your income and debts affect your ability to refinance, so ask them to explain their policies.
Primary sources
Primary sources cited by the Ratellow Research Team. Editorial standards · Correction policy
Related Questions
What is the Loan-to-Value (LTV) ratio, and how does it impact my ability to refinance?
The Loan-to-Value (LTV) ratio plays a critical role in the refinancing process.
How does OSFI's Guideline B-20 affect refinancing?
OSFI's Guideline B-20 establishes the benchmark for residential mortgage underwriting practices that federally regulated financial institutions (FRFIs) must adhere to.
What is a 'straight switch,' and how does it impact refinancing at renewal?
A "straight switch" refers to the process of transferring an existing uninsured mortgage to a new institution when it's up for renewal, without increasing the remaining amortization period or the loan amount.
What Loan-to-Value (LTV) Ratio is Right for Me?
The Loan-to-Value (LTV) ratio is a key metric lenders use to gauge risk.