What Is Total-Debt-Service (TDS) Ratio?
The total-debt-service (TDS) ratio looks at the gross income needed to service your monthly housing costs, GDS Ratio, as well as all other debts such as credit cards, lines of credit, auto or student loans, etc.
For borrowers with good credit, the maximum TDS Ratio is usually 44% of gross annual income. Borrowers with lower credit scores might be restricted to between 38-42% of gross income. Every lender has its own policies around this ratio.
Let’s look at John Snow who makes a current salary of $84,000 / yr ($7,000/month)
Mortgage Payment: $1,418/month
Taxes: $240/month ($2,880/Yr)
Strata Fees: $340/month
Auto Loan: $420/month
TDS RATIO =
$1,418 (mortgage payment P&I) + $240/m (prop. taxes) + $100/m (heat) + $340/m (strata) + $420/m (auto loan)
$7,000 (gross monthly income – $84,000/12)
= 35.97 %
Jon Snow’s TDS in this example is 35.97% and under the maximum 44% allowed by most lenders.