How are debt service ratios (GDS/TDS) used in mortgage qualification?
Debt service ratios, including Gross Debt Service (GDS) and Total Debt Service (TDS), are critical metrics used to assess a borrower's ability to manage mortgage payments and other debt obligations.
Key Points
When lenders check if you can afford a mortgage, they use calculations that assume interest rates might go up, so you're prepared.
If you have a mortgage with default insurance, the lender must follow the insurer's rules about how much debt you can handle.
For mortgages without default insurance, lenders should think about your current situation and what might happen in the future when deciding if you qualify.
Lenders need clear rules about what counts towards your debt, like your income, property taxes, and other loans you have.
Technical Research Verification
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Related Questions
How does the stress test differ for fixed vs. variable in 2026?
Both are stress-tested at the higher of the benchmark (5.25%) or the contract rate + 2%.
Why are 3-year fixed rates dominating the 2026 market?
Borrowers are hesitant to lock in for 5 years at current levels, but find 1-2 year rates too expensive.
Fixed vs. Variable Comparison Table
Fixed locks a 5-year rate with IRD penalty risk; variable floats with prime and typically caps break fees at 3 months interest.
What is the 'IRD' penalty risk for 5-year fixed borrowers?
The Interest Rate Differential (IRD) can cost tens of thousands if you break a fixed mortgage when market rates have dropped.