Quick Fix
When you're looking at a mortgage application, just remember this: keep total monthly housing costs under 28% of gross monthly income. That’s the 28% GDS rule in a nutshell. (And don’t forget—lenders also check TDS and credit scores.)
What does GDS actually mean for real-estate financing?
GDS stands for Gross Debt Service ratio. It tells lenders exactly how much of a borrower’s gross income goes toward housing costs. They use this number to figure out if a household can comfortably handle the mortgage without stretching their budget too thin. Anything above 28% raises eyebrows; anything below 25%? Usually smooth sailing.
How do you calculate GDS step by step?
- Round up the numbers first
- Monthly mortgage payments (principal + interest)
- Monthly property taxes
- Monthly heating and utilities (or whatever the lender uses for your region)
- Half of any condo or HOA fees
- Monthly rent if the property’s already rented out
- Add it all up
For example, let’s say your total housing cost comes to $1,800.
- Grab the gross monthly income
That means salary, bonuses, alimony, investment income—anything that hits your bank account before taxes or deductions.
- Do the math
Here’s the formula:
GDS % = (Total Monthly Housing Cost ÷ Gross Monthly Income) × 100Using our example:
($1,800 ÷ $6,500) × 100 ≈ 27.7 %
What if my GDS calculation doesn’t look right?
- Double-check local numbers: If heating costs or vacancy rates in your area have shot up since 2024, plug the latest figures from Canada Mortgage and Housing Corporation back into the formula.
- Compare it to TDS: Toss in all other monthly debt—car loans, credit cards, student loans—and divide by the same gross income. Most lenders won’t go above 40% for Total Debt Service Bank of Canada.
- Try a stress test: Bump the mortgage rate up by 200 basis points and recalculate GDS. If the borrower still fits comfortably, you’re in good shape.
How can you keep GDS in check before it becomes a problem?
| Action | When to Do It | Source |
|---|---|---|
| Lock in fixed-rate mortgages when spreads are narrow | Q1–Q2 2026 | FDIC |
| Set aside 3–6 months of housing costs in liquid savings | Before you sign a purchase agreement | CFPB |
| Re-run GDS every 12 months or after major life events | Annually or within 30 days of a pay raise, job change, or refinance | NerdWallet |
