The Gross Debt Service Ratio (GDS) is a ratio based on income in relation to mortgage payments. It is used by lenders to qualify prospective buyers for mortgages.
The GDS ratio refers to the relationship between the borrower’s income and the sum of principal, interest, and property tax payments during the year. Normally, the acceptable ratio is between 27% and 30% depending on the lender. In other words a borrower would be allowed between 27% and 30% of gross income to satisfy mortgage principal, interest, and tax payments during a particular year.
GDS = (Principal & Interest + taxes)/Gross Income
In condominium purchases, this ratio is altered to include a portion of the common expenses (normally 50% of those expenses).
Past vocabulary words:
Keith Marshall is a realtor with Prudential Grand Valley Realty, serving Kitchener, Waterloo and Cambridge. If you’re thinking of buying or selling your home, please give me a call. I aim to take the stress and mystery out of the home buying and selling process.