Canadian Mortgage, Insurance and Financial Glossary
Total Debt Service
|Synonyms:||monthly commitments, total debt payments|
|Tags:||credit, debt, lending, mortgage, mortgage lender, qualification|
Definition of total debt service (TDS)
- total debt service (TDS)
- 1. The ratio of a borrower's total monthly debt as compared to his or her monthly gross income. Lenders use this ratio to determine how much the loan applicant is allowed to borrow. Many mortgage loans are turned down due to this monthly debt to income ratio.
Related Terms and Acronyms:
- carrying costs The cost of maintaining a property.
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.
- debt Money one person or firm owes to another person or firm.
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.
- low-down mortgages Mortgages with a low down payment, usually less than 10 percent.
- pre-approval A process that mortgage lenders use to determine how much money they would lend you based on a thorough review of your financial situation. Lenders issue a pre-approval letter which strengthens your position when bidding on a home, as it shows sellers that you will be able to raise funds needed to purchase.
- pre-approval letter A document from a lender or broker, estimating how much a potential home-buyer could borrow, based on current interest rates and a preliminary look at credit history.
- 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.
- total debt service ratio (TDSR)