Ever wondered why your friend making the same income was approved for a higher mortgage? Chances are, their debt ratios played a big role.
Your debt service ratios determine how much of your income can safely go toward housing and debt — and understanding them can make (or break) your approval.
Let’s simplify what they mean, how they’re calculated, and how to improve yours before you buy.
🧮 What Are Debt Ratios?
Lenders use two key ratios to decide how much mortgage you qualify for:
| Ratio | What It Measures | Target Range |
|---|---|---|
| Gross Debt Service (GDS) | % of income spent on housing (mortgage, taxes, heat, condo fees) | ≤ 32% |
| Total Debt Service (TDS) | % of income spent on all debts (housing + credit cards, loans, car payments, etc.) | ≤ 40–44% |
💡 Example:
If you earn $6,000/month and your housing costs are $1,800 → your GDS = 30%.
Add in $400 for a car loan → TDS = 36%.
✅ You’re within range for most lenders.
💥 Why They Matter
- Determine your maximum mortgage amount.
- Affect your interest rate options.
- Signal financial stability to lenders.
Even if your credit score and income look strong, high ratios can limit how much you can borrow — or lead to higher mortgage insurance premiums.
💪 How to Improve Your Debt Ratios
Here’s how to strengthen your profile before applying:
- Pay down revolving debt.
Credit cards and lines of credit impact ratios more than fixed loans. - Avoid new loans or large purchases.
That new SUV can knock thousands off your approval amount. - Increase your down payment.
A larger down payment lowers your mortgage amount (and ratios). - Boost your income.
Consider extra hours or a co-borrower to help balance ratios. - Consolidate high-interest debt.
Combining balances into one lower-payment loan can help reduce TDS.
💡 Pro tip: Your mortgage broker can run scenarios to show how even a $200/month payment change can improve approval power.
🧠 Beyond the Math
Debt ratios are just one part of the picture. Lenders also weigh:
- Employment stability
- Credit history
- Cash flow and savings
- Type of property (condo, detached, etc.)
That’s why working with a mortgage broker early helps you plan strategically — not reactively.
✉️ Want to Know How Your Debt Ratios Stack Up?
Our ARIVL team partners with trusted mortgage brokers who can calculate your GDS/TDS, explain your buying power, and help you build a game plan to strengthen your numbers before you shop.
📩 Email hq@arivl.ca or call Jakie at 780-224-5566 to connect today.
Because understanding your numbers is the first step toward unlocking your dream home.
ARIVL: Your Real Estate Adventure Awaits!