GDS and TDS ratios explained: why your debts decide your refinance

Short answer: Your GDS and TDS ratios are the two numbers Canadian lenders use to decide whether you can afford a mortgage or refinance. GDS (gross debt service) compares your housing costs with your gross income, and FCAC's guide is 39% or less. TDS (total debt service) adds all your other debt payments, with a guide of 44% or less. Both are calculated at the stress-test rate, not your actual rate ^[1][2].

If your equity is fine but you've been told your "debt ratios are too high", this guide is for you. It goes deeper than our mortgage refinance requirements guide, which covers equity, credit and documents. Here we focus on exactly how each ratio is calculated, what counts as debt, and how a debt consolidation refinance changes the math.

What are GDS and TDS ratios?

Both ratios divide monthly costs by your gross (before-tax) monthly income ^[1]:

• GDS = (mortgage payment + property tax + heating + 50% of condo fees) ÷ gross monthly income
• TDS = (everything in GDS + all other monthly debt payments) ÷ gross monthly income

OSFI's underwriting guideline expects federally regulated lenders to set clear policies for what goes into each ratio and to calculate them conservatively ^[3]. For insured mortgages, lenders follow the insurer's rules; CMHC caps GDS at 39% and TDS at 44% ^[2][3].

What counts in each ratio

The 3% and 25-year rules above are CMHC's for insured mortgages ^[2]. A refinance that takes equity out is usually uninsured, and each lender sets its own method under OSFI's guideline ^[3]. In our experience, many lenders use similar treatments, so it's a good way to estimate before you apply.

What isn't in the formula: groceries, phone, childcare and insurance aren't part of GDS or TDS. OSFI does expect lenders to consider other living expenses and your overall situation, though ^[3].

Why the stress test matters for your ratios

Lenders don't use your actual payment. Federally regulated lenders must qualify you at the higher of 5.25% or your contract rate plus 2% ^[4], and FCAC confirms the stress test applies when you refinance or take out a home equity line of credit ^[1]. On a 4.29% fixed offer, for example, your ratios are calculated as if you were paying 6.29%.

Not sure where your ratios land? A licensed 8Twelve agent can calculate your GDS and TDS the way lenders do and compare options from 65+ lenders, OAC. Check your refinance options

Worked example: how paying off debt changes your ratios

Here's a homeowner with good equity who is turned down on TDS (illustrative):

• Gross household income: $115,200 a year ($9,600 a month)
• Mortgage: $430,000, 25-year amortization, offered at 4.29% fixed, so qualified at 6.29%
• Property tax $425 and heating $150 a month; no condo fees
• Credit cards: $22,000 owed; unsecured line of credit: $10,000 owed; car loan: $480 a month

Assumptions: illustrative balances and rates; mortgage payments use semi-annual compounding over 25 years; costs are an estimate. Checked in Python.

What it shows: GDS goes up, because the mortgage is bigger, but it stays under 39%. TDS drops by more than seven points, under 44%, because $960 a month of counted card and line-of-credit payments disappears. That's the core reason a debt consolidation refinance can help you qualify. If you'd rather leave your mortgage alone, our HELOC vs refinance cost comparison runs the numbers on both.

The arithmetic behind it is simple. Each $1,000 on a credit card adds about $30 a month to your TDS under the 3% rule ^[2], while $1,000 added to a mortgage adds about $6.57 a month at a 6.29% qualifying rate over 25 years. Your real mortgage payment in this example goes from about $2,330 to $2,514 at the 4.29% contract rate.

Moving debt into your mortgage can lower your monthly payments but increase the total interest you pay over time. Our guide to debt consolidation mortgages shows that trade-off in three full examples.

Other ways to bring your ratios down

A refinance isn't the only lever. Depending on your situation:

• Pay down revolving balances first. Because cards count at 3% of the balance, even a partial paydown before you apply can move TDS ^[2].
• Add a co-borrower's income, if someone on title has income and agrees to share the debt.
• Count rental income where it applies. For insured mortgages, CMHC allows up to 50% of gross rent from the subject property, or up to 100% from a secondary suite in an owner-occupied two-unit home ^[2]. Uninsured lender policies vary.
• Choose a longer amortization, where the lender allows it. It lowers the qualifying payment, but FCAC warns it raises the interest you pay over time ^[5].
• Borrow less. Trimming the amount lowers the qualifying payment on both ratios.

If you're still above the limits, some alternative lenders accept higher ratios at a higher cost. 8Twelve arranges these through third-party lenders; we don't lend or fund private mortgages.

Step by step: checking your ratios with a broker

1. List every debt with its balance and monthly payment, including any you co-signed.
2. Gather your income proof and your property tax and condo fee amounts.
3. Have a broker calculate both ratios at the stress-test rate, using each lender's method.
4. Model the options: paying out debts in a refinance, adding a co-borrower, or adjusting the amount and amortization.
5. Check equity: your total borrowing usually can't exceed 80% of your home's value in a refinance ^[6].
6. Compare total costs, not just the new monthly payment.

From our desk: The most common file we see isn't someone short on equity. It's someone with plenty of equity whose card minimums push TDS a few points over. Laying the before-and-after side by side usually shows quickly whether a refinance solves it.

Your GDS and TDS ratios often decide a refinance before equity does, and they're calculated at the stress-test rate with revolving debt counted at 3% of the balance. If your ratios are close, a refinance that pays out the right debts can bring you under the limits.

Run the numbers: try our debt consolidation calculator, or see what you could afford with our mortgage affordability calculator.

This article is for general information only and isn't financial, legal or tax advice. Rates, products and terms change without notice and are available on approved credit (OAC). The rate and terms you qualify for depend on your individual financial situation, including credit, income, property and loan-to-value. "Best rates" means the most suitable options available for your situation, not a guarantee of the lowest rate. Example rates and payments are for illustration only, as of October 2026, and are not an offer. 8Twelve Mortgage arranges mortgages through 65+ lenders and does not lend directly. Licensed across Canada — see our licences.

Consolidating unsecured debt into your mortgage may lower your monthly payment but can increase the total interest paid over the amortization period. 8Twelve does not fund second or private mortgages; we arrange them with third-party lenders, and lender and brokerage fees are disclosed in writing before you commit. The ratio example uses assumed income, balances and rates, with semi-annual compounding, for illustration only; each lender's calculation method differs. Rules checked against FCAC, CMHC and OSFI on October 26, 2026.