Mortgage Affordability - Debt Service Ratio

Those two ratios will define your affordability when applying for a mortgage:

  • GDS (Gross Debt Service) is the monthly household income percentage covering your housing costs. It must not exceed 39%. 
  • TDS (Total Debt Service) is the percentage of your monthly household income covering your housing costs and other debts. It must not exceed 44%
GDS = (Total of Mortgage payment or rent, Property taxes, Heating Expenses, 50% of condo fees)                       divided by your gross income. 
TDS = [(Total of GDS, Loan payments, Credit card payments (3% of the outstanding balance), Line of                   credit payments (interest charges)]divided by your gross income.
Gross income is your income before deductions. If you are married you should use your combined income and debt balances.
If you have a high credit score or some valuable assets, you may still qualify for a mortgage, even if your GDS and TDS are slightly higher than the industry standards.

How much is down payment for house in Ontario?

To qualify for a mortgage, you’ll need the necessary down payment, proof of employment, and proof of income, along with your credit score. 

Down Payment represents the portion of the home’s total purchase price.

Whether you are a first-time buyer or have been upgrading your home the minimum down payment in Ontario and across Canada is

  • 5% of the value of a residential property under $500,000
  • Properties from $500,000 to $1 million will require 5% for the first $500,000, then 10% for the portion of the purchase price above $500,000
  • Properties more than $1 million require 20%

If your down payment is less than 20% of the price of your home, you must buy mortgage loan insurance.

If you’re self-employed or have a poor credit history, your lender may require that you get mortgage loan insurance, even if you have a 20% down payment.

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