What exactly are GDS and TDS ratios, and how are they calculated?
Gross Debt Service (GDS) and Total Debt Service (TDS) ratios are vital metrics Federally Regulated Financial Institutions (FRFIs) use to assess a borrower's ability to manage debt.
GDS calculates your mortgage payments plus property costs as a percentage of your gross income, while TDS includes all other debts, like credit card payments.
Key Points
Lenders look closely at your finances and may use a higher interest rate than you'll actually pay, just to be safe.
If you need mortgage insurance, there are limits to how much of your income can go towards housing costs.
Private mortgage insurers also have rules about how much debt you can handle to qualify for their insurance.
Lenders generally want to see that your debt levels are comfortably below their maximum allowed amounts.
Your mortgage payments, property taxes, heating, condo fees, and other debts all affect how much you can borrow.
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Related Questions
How does the new OSFI guidance affect mortgage switching for you?
The latest OSFI guidance simplifies switching lenders at renewal for borrowers with existing uninsured mortgages.
What documentation is typically required for a mortgage application, and how might this differ for a 'straight switch'?
While specific requirements can vary slightly among lenders, the standard documentation confirms income, credit history, and property details.
What are the Loan-to-Income (LTI) limits, and how do they impact lenders?
OSFI is introducing Loan-to-Income (LTI) limits on the uninsured mortgage portfolios of federally regulated financial institutions (FRFIs).
How does 'stress testing' affect the stability of financial institutions?
Stress testing evaluates how a financial institution's mortgage portfolio would fare under tough economic times.