Home
Toronto Waterloo Markham Brampton Mississauga Ontario Richmond Hill Oshawa Oakville Thunder Bay Vaughan Windsor Hamilton Burlington
Land Transfer Tax Mortgage Affordability Debt Service Ratio CMHC Insurance Down Payment SC Escape Clause
About Contact ☰

Debt Service Ratio Calculator

By Patrick Ross ยท Reviewed By Jacob Norris

Calculate your gross debt service and total debt service ratios to know how much of your income is servicing debt payments.

Annual Household Income
Monthly Housing Expenses
Monthly Debt Payments
Debt Service Ratio Calculator

Here are the results for your Gross Debt Service Ratio (GDSR) and Total Debt Service Ratio (TDSR).


Why debt service ratios are important

Debt service ratios are an important metric used to assess how much mortgage you can afford when purchasing a home. The two main ratios used in measuring debt to income for purposes of mortgage affordability are gross debt service (GDS) ratio and total debt service (TDS) ratio. Understanding how these debt to income ratios impact your home affordability is an important step in purchasing a home.

Gross debt service ratio

The first ratio is the gross debt service ratio which measures what percentage of monthly household income will be used to cover your housing costs. A gross debt service ratio of 32% in Canada would be considered affordable. The Canadian Mortgage and Housing Corporation (CMHC) has a 39% limit on your gross debt service ratio.

How to calculate gross debt service ratio

You can calculate your gross debt service ratio (GDSR) by taking your home expenses and dividing them by your monthly income.

It is important to note that your home expenses are for the home you are planning on purchasing and not for your current living situation.

Expenses related to the home include:

  • Monthly mortgage payment (principal and interest)
  • Monthly heating expenses
  • Monthly property taxes
  • Monthly condo fees
  • Other rental fees (100%) and association fees (50%)

Total debt service ratio

The total debt service ratio (TDSR) measures the percentage of monthly household income to cover all of your debt payments. Since this debt to income ratio includes home expenses in addition to other debt payments, the CMHC has set a higher limit of 44% which can not be exceeded.

How to calculate total debt service ratio

The total debt service ratio is calculated by taking all your monthly expenses related to debt in addition to your home related expenses and dividing them by your monthly household income.

Some of the monthly debt payments could include:

  • Credit cards
  • Vehicle loan or lease
  • Loans and lines of credit

the 32/40 rule for mortgage affordability

Although the CMHC has maximum limits of 39% for the gross debt service ratio (GDSR) and 44% for the total debt service ratio (TDSR) many banks use different percentages. This is why it is often recommended to use the 32/40 rule to help determine mortgage affordability. The 32 is for the GDSR and says that no more than 32% of your household gross income should go to home related expenses. While the 40 is for the TDSR which has no more than 40% of your household income to service all your debt.

These ratios are then used by the banks to stress test your ability to service your mortgage payments. It is important to note that there are additional factors such as good credit and stable income that will allow borrowers to exceed these limits.

Dislcaimer

This calculator is for illustrative purposes only. Consult a professional before moving forward with any financial decisions.