Mortgage Approval 101: GDS & TDS Explained

Christopher J. Collins • November 26, 2025

Can You Afford That Mortgage? Let’s Talk About Debt Service Ratios

One of the biggest factors lenders look at when deciding whether you qualify for a mortgage is something called your debt service ratios. It’s a financial check-up to make sure you can handle the payments—not just for your new home, but for everything else you owe as well.


If you’d rather skip the math and have someone walk through this with you, that’s what I’m here for. But if you like to understand how things work behind the scenes, keep reading. We’re going to break down what these ratios are, how to calculate them, and why they matter when it comes to getting approved.


What Are Debt Service Ratios?

Debt service ratios measure your ability to manage your financial obligations based on your income. There are two key ratios lenders care about:

  1. Gross Debt Service (GDS)
    This looks at the percentage of your income that would go toward housing expenses only.

   2. Total Debt Service (TDS)
       This includes your housing costs plus all other debt payments—car loans, credit cards, student loans, support payments, etc.


How to Calculate GDS and TDS

Let’s break down the formulas.


GDS Formula:

(P + I + T + H + Condo Fees*) ÷ Gross Monthly Income


Where:

P = Principal

I = Interest

T = Property Taxes

H = Heat


Condo fees are usually calculated at 50% of the total amount


TDS Formula:

(GDS + Monthly Debt Payments) ÷ Gross Monthly Income


These ratios tell lenders if your budget is already stretched too thin—or if you’ve got room to safely take on a mortgage.


How High Is Too High?


Most lenders follow maximum thresholds, especially for insured (high-ratio) mortgages.

As of now, those limits are typically:

GDS: Max 39%

TDS: Max 44%


Go above those numbers and your application could be declined, regardless of how confident you feel about your ability to manage the payments.


Real-World Example

Let’s say you’re earning $90,000 a year, or $7,500 a month.

You find a home you love, and the monthly housing costs (mortgage payment, property tax, heat) total $1,700/month.


GDS = $1,700 ÷ $7,500 = 22.7%


You’re well under the 39% cap—so far, so good.


Now factor in your other monthly obligations:

  • Car loan: $300
  • Child support: $500
  • Credit card/line of credit payments: $700
    Total other debt = $1,500/month


Now add that to the $1,700 in housing costs:
TDS = $3,200 ÷ $7,500 = 42.7%


Uh oh. Even though your GDS looks great, your TDS is just over the 42% limit. That could put your mortgage approval at risk—even if you’re paying similar or higher rent now.


What Can You Do?

In cases like this, small adjustments can make a big difference:

  • Consolidate or restructure your debts to lower monthly payments
  • Reallocate part of your down payment to reduce high-interest debt
  • Add a co-applicant to increase qualifying income
  • Wait and build savings or credit strength before applying


This is where working with an experienced mortgage professional pays off. We can look at your entire financial picture and help you make strategic moves to qualify confidently.


Don’t Leave It to Chance

Everyone’s situation is different, and debt service ratios aren’t something you want to guess at. The earlier you start the conversation, the more time you’ll have to improve your numbers and boost your chances of approval.


If you're wondering how much home you can afford—or want help analyzing your own GDS and TDS—let’s connect. I’d be happy to walk through your numbers and help you build a solid mortgage strategy.


CHRIS COLLINS
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Fixed vs. Variable Mortgage Rates in Canada

By Christopher J. Collins • November 19, 2025
Fixed vs. Variable Rate Mortgages: Which One Fits Your Life? Whether you’re buying your first home, refinancing your current mortgage, or approaching renewal, one big decision stands in your way: fixed or variable rate? It’s a question many homeowners wrestle with—and the right answer depends on your goals, lifestyle, and risk tolerance. Let’s break down the key differences so you can move forward with confidence. Fixed Rate: Stability & Predictability A fixed-rate mortgage offers one major advantage: peace of mind . Your interest rate stays the same for the entire term—usually five years—regardless of what happens in the broader economy. Pros: Your monthly payment never changes during the term. Ideal if you value budgeting certainty. Shields you from rate increases. Cons: Fixed rates are usually higher than variable rates at the outset. Penalties for breaking your mortgage early can be steep , thanks to something called the Interest Rate Differential (IRD) —a complex and often costly formula used by lenders. In fact, IRD penalties have been known to reach up to 4.5% of your mortgage balance in some cases. That’s a lot to pay if you need to move, refinance, or restructure your mortgage before the end of your term. Variable Rate: Flexibility & Potential Savings With a variable-rate mortgage , your interest rate moves with the market—specifically, it adjusts based on changes to the lender’s prime rate. For example, if your mortgage is set at Prime minus 0.50% and prime is 6.00% , your rate would be 5.50% . If prime increases or decreases, your mortgage rate will change too. Pros: Typically starts out lower than a fixed rate. Penalties are simpler and smaller —usually just three months’ interest (often 2–2.5 mortgage payments). Historically, many Canadians have paid less overall interest with a variable mortgage. Cons: Your payment could increase if rates rise. Not ideal if rate fluctuations keep you up at night. The Penalty Factor: Why It Matters More Than You Think One of the biggest surprises for homeowners is the cost of breaking a mortgage early —something nearly 6 out of 10 Canadians do before their term ends. Fixed Rate = Unpredictable, potentially high penalty (IRD) Variable Rate = Predictable, usually lower penalty (3 months’ interest) Even if you don’t plan to break your mortgage, life happens—career changes, family needs, or new opportunities could shift your path. So, Which One is Best? There’s no one-size-fits-all answer. A fixed rate might be perfect for someone who wants stable budgeting and plans to stay put for years. A variable rate might work better for someone who’s financially flexible and open to market changes—or who may need to exit their mortgage early. Ultimately, the best mortgage is the one that fits your goals and your reality —not just what the bank recommends. Let's Find the Right Fit Choosing between fixed and variable isn’t just about numbers—it’s about understanding your needs, your future plans, and how much financial flexibility you want. Let’s sit down and walk through your options together. I’ll help you make an informed, confident choice—no guesswork required.

Everything You Should Know Before Buying a Home

By Christopher J. Collins • November 12, 2025
Thinking About Buying a Home? Here’s What to Know Before You Start Whether you're buying your very first home or preparing for your next move, the process can feel overwhelming—especially with so many unknowns. But it doesn’t have to be. With the right guidance and preparation, you can approach your home purchase with clarity and confidence. This article will walk you through a high-level overview of what lenders look for and what you’ll need to consider in the early stages of buying a home. Once you’re ready to move forward with a pre-approval, we’ll dive into the details together. 1. Are You Credit-Ready? One of the first things a lender will evaluate is your credit history. Your credit profile helps determine your risk level—and whether you're likely to repay your mortgage as agreed. To be considered “established,” you’ll need: At least two active credit accounts (like credit cards, loans, or lines of credit) Each with a minimum limit of $2,500 Reporting for at least two years Just as important: your repayment history. Make all your payments on time, every time. A missed payment won’t usually impact your credit unless you’re 30 days or more past due—but even one slip can lower your score. 2. Is Your Income Reliable? Lenders are trusting you with hundreds of thousands of dollars, so they want to be confident that your income is stable enough to support regular mortgage payments. Salaried employees in permanent positions generally have the easiest time qualifying. If you’re self-employed, or your income includes commission, overtime, or bonuses, expect to provide at least two years’ worth of income documentation. The more predictable your income, the easier it is to qualify. 3. What’s Your Down Payment Plan? Every mortgage requires some amount of money upfront. In Canada, the minimum down payment is: 5% on the first $500,000 of the purchase price 10% on the portion above $500,000 20% for homes over $1 million You’ll also need to show proof of at least 1.5% of the purchase price for closing costs (think legal fees, appraisals, and taxes). The best source of a down payment is your own savings, supported by a 90-day history in your bank account. But gifted funds from immediate family and proceeds from a property sale are also acceptable. 4. How Much Can You Actually Afford? There’s a big difference between what you feel you can afford and what you can prove you can afford. Lenders base your approval on verifiable documentation—not assumptions. Your approval amount depends on a variety of factors, including: Income and employment history Existing debts Credit score Down payment amount Property taxes and heating costs for the home All of these factors are used to calculate your debt service ratios—a key indicator of whether your mortgage is affordable. Start Early, Plan Smart Even if you’re months (or more) away from buying, the best time to start planning is now. When you work with an independent mortgage professional, you get access to expert advice at no cost to you. We can: Review your credit profile Help you understand how lenders view your income Guide your down payment planning Determine how much you can qualify to borrow Build a roadmap if your finances need some fine-tuning If you're ready to start mapping out your home buying plan or want to know where you stand today, let’s talk. It would be a pleasure to help you get mortgage-ready.