TDS Ratio (Total Debt Service)

GDS plus everything else you owe

TDS is the broader of the two debt service ratios in a Canadian mortgage application. It starts with the exact housing costs used in the GDS ratio, stress-tested mortgage payment included, and stacks all your other monthly obligations on top. Both ratios must pass, but for anyone carrying debts, TDS is almost always the one that decides.

The logic is blunt: every dollar of gross income can only service debt once. A car payment does not care that you also want a mortgage, so the lender counts them side by side.

What debts count

Broadly, anything that shows up on your credit report as a recurring obligation:

• Car loans and leases, at the full monthly payment.
• Student loans, at the actual required payment.
• Credit cards, typically counted as 3% of the outstanding balance even if your real minimum is lower.
• Lines of credit with a balance, also counted at around 3% of the balance.
• Personal loans and financing plans.
• Child or spousal support payments you are required to make.
• Co-signed or guaranteed loans, usually counted as yours unless you can prove the other party pays.

The car payment problem

The gap between the two caps is only 5 points of gross income, so a modest debt load eats it fast. Once your monthly debts exceed 5% of gross income, TDS becomes your binding constraint, and every additional debt dollar displaces a mortgage dollar.

The exchange rate is brutal. At a qualifying rate around 6.5%, each $100,000 of mortgage over 25 years costs about $670 per month in the test (as of July 2026). A $650 monthly car loan therefore occupies room that could otherwise carry roughly $100,000 more mortgage. That figure is illustrative, and the exact impact depends on which ratio binds in your file, but the order of magnitude is real: a mid-size car payment can outweigh years of down payment savings.

The lever: clear debts before you apply

Because TDS counts payments rather than balances, the highest-impact move before a mortgage application is eliminating payments. Paying out a car loan frees its entire payment; paying a line of credit down to zero removes the 3% charge on its balance. Paying down revolving balances also helps your credit score through lower utilization, a double win.

The mirror image matters too: do not finance a car, furniture or anything else between approval and closing. Lenders commonly re-pull the credit file before funding, and a new payment can push TDS back over the cap after you have already passed.