Gross debt service

Definition

Gross debt service ratio (GDS): the share of your gross income going to housing costs. The calculation uses the mortgage payment at the qualifying rate, municipal and school taxes, heating, and, for a condo, a portion of the condo fees, often half. Most lenders cap GDS at 39% on an insured loan, sometimes a little higher on a conventional one. Example: gross income of $96,000 a year, or $8,000 a month; 39% gives $3,120 a month for housing. If taxes and heating take $520, $2,600 is left for the qualifying payment. A higher-than-expected tax bill directly reduces the eligible loan, which is why we price the specific property, not an average.