Qualifying
Total debt service ratio (TDS)
All your monthly debt payments as a share of gross income, including housing. The insured guideline is 44%.
Also called TDS.
TDS takes everything in your gross debt service ratio and adds every other monthly obligation: car payments, lines of credit, student loans, support payments, and a payment on the full limit of any credit card or HELOC, whether you carry a balance or not.
That last item catches people. An unused $30,000 line of credit still uses up debt-service room, because the lender assumes you could draw it tomorrow. Closing it costs nothing and can add five figures of purchasing power.
The insured guideline is 44%. As with GDS, lenders can go above it on a strong file (a solid down payment, high credit, long job tenure and provable income), but that room shrinks quickly as the ratio rises.
On many files, credit cards, lines of credit and car loans limit how much you can borrow more than the mortgage payment does.
Related terms
Gross debt service ratio (GDS)
Your housing costs as a share of your gross income (mortgage payment, property taxes, heat and half the condo fee). The insured guideline is 39%.
Stress test
The rule that lenders qualify you at about 2 percentage points above your contract rate, to confirm you could still carry the mortgage.
Qualifying rate
The rate lenders test you at: the greater of your contract rate plus 2 percentage points, or 5.25%.
This definition describes how the term is used in Canadian residential mortgage lending. It’s general information, not advice on your file. Rules, thresholds and rates change. Where a figure is quoted, it’s current as of the date shown on the related guide.
Sharp rates. The full picture.
Ask Daniel about this term
Daniel De Sousa, Mortgage Associate, can walk you through it before you sign anything. Or get a rate quote: 6 questions, about two minutes, and no credit check to start.
No credit check, and no commitment.