Canadian Mortgage, Insurance and Financial Glossary
Gross Debt Service
|Synonyms:||debt servicing ratio, debt to income percentage, gross debt service ratio, total debt ratio|
|Notes:||Used by mortgage lender underwriters to determine one's ability to qualify for a mortgage loan.|
|Tags:||credit, credit rating, debt, mortgage, mortgage lender|
Definition of gross debt service (GDS)
- gross debt service (GDS)
- 1. The percentage of a borrower's gross income used to cover monthly payments associated with housing costs including utilities, mortgage payments, taxes and condominium fees when applicable. Ideally, your ratio should not exceed 32%. Also known as "gross debt service ratio", or "GDS."
Related Terms and Acronyms:
credit rating (CR)
A judgement of a person's ability to repay debts. The rating is often based on a person's current and projected income and past debt payment history. Also called a credit score.
➥ A metric to measure the credit worthiness of a debtor.
credit report (CR)
A report on a loan applicant's willingness and ability to make payments in a timely manner in the past. This report is provided to the bank by an outside agency.
➥ A report that outlines the credit worthiness of an individual or entity.
gross debt service (GDS)
The total monthly mortgage (or rent) payments, property taxes, utilities and maintenance fees as a percentage of gross monthly income.
➥ Used by mortgage lender underwriters to determine one's ability to qualify for a mortgage loan.
- mortgage application A document in which a prospective borrower details his or her financial situation to qualify for a loan.
- principal, interest and taxes (PIT) Principal, interest and taxes. The components of a monthly mortgage payment.
- qualifying ratios As calculated by lenders, the percentage of income that is spent on housing debt and combined household debt. The first qualifying ratio, called the gross debt service or GDS is up to and including a maximum of 32% of the combined gross family income. The second qualifying ratio is the Total debt service or TDS is up to and including 40% of gross income.
- ratio Comparison of two figures used to evaluate business performance, such as debt/equity ratio and return on investment.
- refinance To arrange a new loan for an increased amount or better terms whereby the old loan is paid off from the proceeds of the new loan.
- total debt service (TDS) The ratio of a borrower's total monthly debt payments to his or her monthly gross income. Lenders use this ratio to determine how much of a loan a borrower is qualified for.
- total expense ratio (TER) The percentage of monthly debt payments compared to total before-tax income.