What is gross debt service (GDS)?

Definition of Gross Debt Service

Gross debt service (GDS) is a way for lenders to calculate whether or not the borrower is able to cover all housing payments given their current debt load. The GDS will include mortgage payments, property taxes and utilities. 

Why is this term important?

Lenders calculate the gross debt service (GDS) by adding your annual mortgage payments with property taxes and dividing that by your gross annual income. This calculation helps lenders determine if the money you earn is enough to cover your housing costs, minus any current debt obligations you may have. 

Lenders typically approve a borrower for a mortgage if their GDS is under 32%, which is the maximum acceptable debt level before a borrower is either denied a loan or must pay a higher mortgage rate for the loan. If your GDS is above 32%, you could still qualify for a mortgage, as long as you have a high credit score.

Keep in mind that the maximum GDS that lenders will consider is 39%.

Examples of term

Say that you have annual mortgage payments of $15,000 and property taxes add another $3,000 per year. Those two numbers divided by your gross annual income of $65,000 means that your gross debt service is 28% and this is an acceptable GDS for lenders if you are applying for a mortgage.