The 28/36 debt-to-income ratio is an American rule. No Canadian lender underwrites to it. In Canada the two numbers that decide your file are GDS 39% and TDS 44% — the debt service limits CMHC, Sagen, and Canada Guaranty apply to insured mortgages, and the limits most A-lenders mirror on uninsured files.
That correction is not academic. The 28/36 rule is the stricter of the two, and it is stricter by a wide margin. On a $120,000 household income, qualifying at 28/36 instead of 39/44 understates your housing budget by roughly $1,100 per month, which is about $170,000 of mortgage at today’s qualifying rates. I have had clients talk themselves out of a purchase on that math.
The short answer on 28/36 vs 39/44
- 28/36 is a U.S. guideline: 28% of gross income for housing, 36% for all debt.
- 39/44 is the Canadian qualifying standard: GDS up to 39% of gross income, TDS up to 44%.
- 32/40 is a comfort benchmark some calculators still show. It is not a lender cap.
- Up to about 50% TDS is where B-lender territory usually starts.
- All of it is calculated at the stress-test rate, not at your contract rate.
What the 28/36 debt-to-income ratio means
The 28/36 rule means you keep housing costs at or below 28% of gross income and total monthly debt at or below 36% of gross income. Gross income means income before tax and deductions.
The 28% side is the housing limit, sometimes called a front-end ratio. It usually refers to mortgage payments, property taxes, heating costs, and part of condo fees where applicable.
The 36% side is the total debt limit, sometimes called a back-end ratio. It includes the housing costs above plus other required monthly debt payments like credit cards, car loans, lines of credit, student loans, and support payments.
That rule comes out of U.S. conventional underwriting, and it keeps showing up in search results because the American content volume is larger than ours. It is a reasonable budgeting filter. It is not what a Canadian underwriter runs.
28/36 rule vs GDS and TDS in Canada
In Canada, the closest match to the 28/36 rule is GDS and TDS. GDS stands for Gross Debt Service, and TDS stands for Total Debt Service.
GDS measures housing costs as a share of gross income. TDS measures housing costs plus other monthly debt obligations as a share of gross income.
CMHC states it plainly: debt service ratios are restricted to 39% (GDS) and 44% (TDS). Sagen and Canada Guaranty, the two private mortgage insurers, publish the same maximums, and the federal government’s own Mortgage Qualifier Tool uses 39% and 44% as its guideline.
Those limits are hard on insured files, meaning a mortgage with less than 20% down. On uninsured files there is no regulatory cap at all. OSFI considered prescribing GDS and TDS limits for uninsured lending and decided against it, leaving the limits to each lender’s own risk appetite. In practice most A-lenders set them at 39/44 anyway, and some will stretch past 44% TDS when the rest of the file is strong.
You cannot simply relabel 28 as GDS and 36 as TDS, because the Canadian ratios are built from different inputs. Canadian ratios use a stress-tested payment instead of your contract payment, they add heating costs and 50% of condo fees to the housing side, and they count 3% of your credit card balance as a monthly payment even when your statement minimum is lower.
Insured and conventional files can also be treated differently because lender policy, insurer rules, down payment size, and property use all matter. The same borrower can fit one lender’s ratios and miss another lender’s because of how income is calculated or how debts are counted.
| Who sets the limit | GDS | TDS | Applies to |
|---|---|---|---|
| CMHC, Sagen, Canada Guaranty | 39% | 44% | Insured mortgages, less than 20% down |
| FCAC Mortgage Qualifier Tool | 39% | 44% | Federal consumer guideline |
| Most A-lenders and banks | typically 39% | typically 44% | Uninsured, by lender policy rather than regulation |
| B-lenders and alternative lenders | often higher | commonly up to about 50% | Non-prime, self-employed, credit rebuild |
| Private lenders | not ratio-driven | not ratio-driven | Equity position and exit strategy |
| 28/36 rule | 28% | 36% | United States, not used in Canadian underwriting |
Two numbers you can safely ignore
35/42. CMHC temporarily tightened to 35% GDS and 42% TDS in mid-2020 and reversed it in July 2021, at the same time it moved the minimum credit score back to 600. Articles still quoting 35/42 as current are years out of date.
32/40. This is a conservative comfort benchmark, not a cap. A borrower at 32/40 has real breathing room. A borrower at 38/43 is still inside every insurer’s guideline.
How to calculate GDS and TDS step by step
The GDS formula is principal + interest + property taxes + heat, divided by gross income. Condo files add 50% of the condominium fees. Leasehold and chattel files add 100% of site or ground rent.
The TDS formula is all of the above plus your other debt obligations, divided by gross income.
You use gross monthly income, not take-home pay, and the payment used is the stress-tested payment. Here is the full sequence on a Toronto condo file:
- Gross monthly income. A $120,000 household income is $10,000 per month.
- Your ceilings. 39% of $10,000 is $3,900 for housing. 44% is $4,400 for everything.
- Non-mortgage housing costs. Property tax $350, heat $100, and 50% of $600 condo fees is $300. That is $750 before the mortgage payment.
- GDS room for the mortgage. $3,900 − $750 = $3,150 per month.
- Other debts. A $500 car payment, plus 3% of a $6,000 credit card balance, which is $180. That is $680.
- TDS room for the mortgage. $4,400 − $750 − $680 = $2,970 per month.
- Take the lower number. TDS binds here, so the qualifying payment is $2,970, not $3,150.
At a 5.99% qualifying rate over 25 years, roughly $639 of monthly payment carries $100,000 of mortgage. A $2,970 payment supports about $465,000. Clear the car loan and the credit card and GDS becomes the binding ratio at $3,150, which supports about $493,000.
That is the part most affordability articles skip. Your approval is set by whichever ratio runs out first, and for borrowers carrying any consumer debt it is almost always TDS.
What counts in GDS and TDS and what does not
The mortgage payment does count. It sits on the housing side and therefore also affects the total debt side. So if you are asking does debt-to-income ratio include mortgage, the answer is yes, and it uses the stress-tested payment rather than your contract payment.
The treatment of revolving credit is where files break. CMHC’s rule is specific. For unsecured lines of credit and credit cards, lenders must use a monthly payment of no less than 3% of the outstanding balance. For secured lines of credit, they use a payment based on the outstanding balance amortized over 25 years at the contract rate, or the benchmark rate when the contract rate is unknown.
Two consequences borrowers rarely expect. A $10,000 credit card balance counts as $300 per month even if your statement minimum is $200, which alone costs roughly $47,000 of mortgage. A $100,000 secured line of credit counts as roughly $640 per month even if you are paying interest only at about $500, which costs roughly $100,000 of mortgage.
Car insurance is usually not included in debt service ratios. If you are asking is car insurance included in debt-to-income ratio, the usual answer is no, but it still matters for your real monthly budget. The same goes for daycare, groceries, cell phone bills, subscriptions, and gas.
Heating is estimated when no history exists. CMHC expects a reasonable estimate based on property size, location, and heating system, so lender defaults vary. A one-bedroom condo and a detached home in Midland will not be assigned the same figure.
| Counted in GDS / TDS | Usually not counted |
|---|---|
| Mortgage principal and interest, at the stress-test rate | Groceries and household spending |
| Property taxes | Cell phone bills and internet |
| Heating costs | Streaming subscriptions |
| 50% of condo fees, 100% of ground or site rent | Car insurance |
| 3% of credit card and unsecured line of credit balances | Gas and transit |
| Secured line of credit amortized over 25 years | Childcare and daycare |
| Car loans and leases | Hydro and water outside lender formulas |
| Student and personal loans | RRSP and TFSA contributions |
| Support payments owed | Life insurance premiums |
The stress test sets the payment inside your ratios
Your GDS and TDS are not calculated on the payment you will actually make. They are calculated on the qualifying payment, and the qualifying rate is the greater of your contract rate plus 2 percentage points, or 5.25%. That applies to fixed, variable, and adjustable mortgages, and to every term length.
The gap is large. At a 3.99% contract rate over 25 years, each $100,000 of mortgage costs about $526 per month. At the 5.99% qualifying rate, the same $100,000 costs about $639. Same loan, 21% more payment in the eyes of the underwriter.
Run that through the example above. The borrower with $3,450 of monthly housing room would carry about $656,000 at the contract rate but qualifies for roughly $540,000 at the stress-tested rate. That $117,000 difference is the single biggest reason an online debt-to-income ratio calculator feels more generous than a lender decision.
There are exceptions on the renewal side. Renewing with your existing lender does not trigger a new stress test. Insured borrowers can switch lenders at renewal without requalifying. And since November 2024, OSFI no longer expects the minimum qualifying rate on an uninsured straight switch, meaning same balance, same amortization, new lender. If you are renewing and have been told you are trapped, that is worth a second opinion.
Lenders also do not approve a mortgage on ratios alone. They assess credit history, income stability, down payment, property type, and occupancy. Compensating factors such as stronger credit, more liquid assets, a larger down payment, or lower loan-to-value can help when ratios are close.
28/36 versus 39/44 at the same income
This table is the clearest way to see what the correction is worth. Both sides use the same gross income. Only the rule changes.
| Gross monthly income | 28% housing (U.S. rule) | 39% GDS (Canada) | 36% total (U.S. rule) | 44% TDS (Canada) |
|---|---|---|---|---|
| $4,000 | $1,120 | $1,560 | $1,440 | $1,760 |
| $5,000 | $1,400 | $1,950 | $1,800 | $2,200 |
| $6,000 | $1,680 | $2,340 | $2,160 | $2,640 |
| $7,500 | $2,100 | $2,925 | $2,700 | $3,300 |
| $8,000 | $2,240 | $3,120 | $2,880 | $3,520 |
| $10,000 | $2,800 | $3,900 | $3,600 | $4,400 |
| $12,500 | $3,500 | $4,875 | $4,500 | $5,500 |
| $15,000 | $4,200 | $5,850 | $5,400 | $6,600 |
At every income level the Canadian housing limit is about 39% larger than the American one. Planning a purchase on 28% is planning for a smaller home than you can actually finance.
Existing debt still eats into the total. If gross monthly income is $6,000 and you already carry a $450 car loan and $100 in credit card minimums, the room left for housing under the 44% TDS limit is $2,090 rather than the full $2,340 that GDS would allow.
What GDS 39% supports in mortgage dollars
Working backwards from the ratio is more useful than guessing at a price. The table below assumes a 25-year amortization, a 5.99% qualifying rate, $450 per month in property taxes and heat, and no other debts, so GDS is the binding ratio. Change any of those and the number moves.
| Gross monthly income | 39% GDS ceiling | Room for the mortgage payment | Approximate mortgage |
|---|---|---|---|
| $5,000 | $1,950 | $1,500 | about $235,000 |
| $6,000 | $2,340 | $1,890 | about $296,000 |
| $7,500 | $2,925 | $2,475 | about $387,000 |
| $8,000 | $3,120 | $2,670 | about $418,000 |
| $10,000 | $3,900 | $3,450 | about $540,000 |
| $12,500 | $4,875 | $4,425 | about $692,000 |
| $15,000 | $5,850 | $5,400 | about $845,000 |
A pre-approval is usually valid for 90 to 120 days. A 25-year amortization is still the common default, while 30 years is available on insured files for first-time buyers and buyers of newly built homes, and on many uninsured files with 20% down.
These are planning figures, not rate quotes or approvals. Condo fees, a higher tax bill, or a single car loan will pull each line down, and a required income calculator is the faster way to test your own numbers.
What is an acceptable debt-to-income ratio for a mortgage?
An acceptable debt to income ratio for mortgage qualification in Canada has a specific answer: under 39% GDS and under 44% TDS places you inside A-lender guidelines. Lower is more comfortable, but it is not required.
American articles treat 43% as a danger line, because of how U.S. qualified-mortgage rules were written. In Canada 43% TDS is inside the insured maximum. The Canadian read is different at almost every level.
| Ratio | Canadian read | What it usually means |
|---|---|---|
| Under 32% | Conservative | Room for tax increases, condo fee increases, and rate shock |
| 32% to 39% | Normal | Comfortably inside GDS guidelines on a clean file |
| 40% | Normal for TDS | Inside the 44% cap and approvable at A-lenders |
| 42% | Workable | Credit, income stability, and down payment carry more weight |
| 43% | Near the cap | One tax or heat revision can push the file offside |
| 44% | At the insured maximum | No cushion left, so every input has to hold |
| 45% to 50% | Outside insured guidelines | Uninsured exception or a B-lender solution |
| Over 50% | Heavy | Restructuring, debt consolidation, or private financing |
What 40%, 42%, 43%, 45%, and 50% DTI mean in practice
A 40 debt to income ratio means 40% of gross monthly income is already committed to required debt payments. In Canada that sits comfortably inside the 44% TDS limit and is approvable at A-lenders. It leaves less cushion if property taxes or condo fees rise.
A 42 debt to income ratio is still inside Canadian guidelines, but it is a higher-leverage file. Underwriters pay closer attention to credit history, income stability, down payment, and the property itself.
A 43 debt to income ratio or 43 percent debt to income ratio is not the red line Americans assume. It is under the 44% insured cap. It is tight enough that a revision to your heating estimate or tax figure can push the file offside, so the inputs need to be accurate the first time.
A 45 debt to income ratio sits outside insured guidelines. It moves the file to an uninsured lender with a wider policy or to B-lender territory, where approval is possible but the rate and the structure matter more than the headline number.
A 50 debt to income ratio or 50 percent debt to income ratio usually indicates heavy debt pressure relative to income. Some borrowers at that level still place a file with a B-lender or private lender, but costs are higher and the exit strategy matters more than the rate.
The same ratio can be viewed differently depending on the file around it. A borrower with strong credit, reserves in the bank, and stable salaried income is not viewed the same way as a borrower with weaker credit, variable self-employed income, and no cash left after closing.
Credit score changes which ratios you get
The 39/44 maximum assumes a strong credit profile. CMHC’s minimum credit score for an insured mortgage is 600 for at least one borrower, while Sagen and Canada Guaranty recommend at least 680 on their standard programs. Below the 680 mark, lenders and insurers commonly trim the ratios they will allow rather than declining outright, which is why the same income can produce two different approvals at two lenders.
Credit utilization matters here for a reason specific to the formula. Your card balance drives the 3% payment inside TDS and it drives your score. Paying a card down improves both sides at once. If you are rebuilding, the minimum credit score thresholds are worth reviewing before you apply.
There is a Canadian debt-to-income rule, but it is not 36%
Since 2025, OSFI has applied loan-to-income limits to each bank’s uninsured mortgage portfolio, restricting the share of new uninsured mortgages that exceed 4.5 times a borrower’s gross annual income. It is a portfolio limit rather than a per-borrower cap, so it will not appear on your approval letter.
It still reaches you. When a lender is close to its internal threshold, high-income-multiple files get priced or paced differently, which is one more reason the same application can come back with different answers at different lenders in the same week. On a $120,000 income, 4.5 times income is a $540,000 mortgage, which is close to what 39% GDS supports in the table above. Most borrowers never notice the rule at all.
How co-borrowers, rental income, self-employed income, and investment properties affect qualification
A co-borrower can help by adding income, but that person also adds debts. We always compare both sides, because an applicant with a car lease and a line of credit can lower the approval. A co-signer supports the file differently, depending on the lender’s policy and how liability is shared.
Rental income is counted, but rarely in full. On an insured application where the rental property is the subject property, CMHC allows up to 50% of gross rental income to be added to income, with taxes and heat excluded from the calculation. For a two-unit owner-occupied property, up to 100% of the gross rent from the secondary suite can be considered. For rental properties that are not the subject of the application, net rental income is used. The difference between a 50% add-back and a rental offset method can move your approval by six figures.
Self-employed income is often reviewed more carefully than salaried income. Many lenders want two years of tax documents or accountant-supported financials, and files are frequently averaged rather than judged on one strong recent quarter.
Support payments can work either as debt or income depending on direction and documentation. If you pay support, it counts against your ratios. If you receive support, lenders may count it only when it is documented and likely to continue.
Second homes, investment properties, and new subordinate financing change the ratios because they add carrying costs and can change the lender channel. This is where broker-not-banker matters, because we can compare A-lender, B-lender, and private structures across 35+ lenders rather than one bank’s box.
Mortgage rules in force in 2026 that change the math
Three changes from the December 2024 reforms still affect how GDS and TDS land today.
The insured mortgage cap is $1.5 million, up from $1 million, which brings more GTA purchases into insured lending and its 39/44 limits. Check the minimum down payment tiers before you set a budget at that price point.
30-year amortizations are available on insured mortgages for all first-time buyers and all buyers of newly built homes. A 30-year schedule at the same qualifying rate lowers the payment inside your ratios by about 7%, which is roughly $41,000 of extra mortgage on a $540,000 file.
The renewal stress-test exemption lets insured borrowers switch lenders at renewal without requalifying, with uninsured straight switches treated the same way since November 2024.
The qualifying rate itself has not changed. It is the greater of your contract rate plus 2%, or 5.25%.
DTI vs debt-to-credit ratio: do not confuse them
Debt-to-income ratio measures required monthly debt against gross monthly income. Debt-to-credit ratio usually means credit utilization, which measures balances against available credit limits.
These two ratios affect different parts of the mortgage decision. DTI affects affordability and qualification, while utilization affects credit scoring and how your credit profile looks to the lender.
A borrower can sit at 38% TDS with a 620 score because two cards are near their limits. The opposite also happens: strong credit scores with too much monthly debt for the target payment. The underwriter looks at both.
How to lower your GDS and TDS before you apply
The fastest lever is removing a required monthly payment, not reducing a balance by a little. At a 5.99% qualifying rate over 25 years, every $100 per month of debt payment costs you roughly $15,600 of mortgage. Which means paying off a $500 car loan is worth roughly $78,000 of mortgage room, and clearing a $10,000 credit card balance is worth roughly $47,000.
Reducing or closing an unused secured line of credit can be worth more than either, because of the 25-year amortization rule applied to the balance.
Avoid taking on new financing before you apply or before your mortgage closes. A new car payment or financed purchase can change the file more than borrowers expect.
Increasing verifiable income can also help, but lenders only count income they can document and accept. Overtime, bonus, self-employed income, and rental income all have their own rules.
Consolidating debt into the mortgage is sometimes the cleanest fix, because it replaces several required payments with one. It is a structure decision rather than a default answer, so compare the payment, the penalty, and the amortization before you commit.
Do not close accounts blindly or move money around without checking the lender impact first. Timing matters, because the payment has to be gone from the bureau, or documented as paid out at closing, before it comes out of your ratios.
Budgeting reality: GDS and TDS do not measure your full monthly life
The ratios exclude most of what a household actually spends. Childcare, groceries, transit, insurance, repairs, savings, and emergency reserves are all outside the formula.
That is why 39/44 is a qualification test, not a household budget. A file can pass lender math at 43% TDS and still feel tight once real-life costs show up every month.
A safer plan is to run two tests before you buy: a qualification test at the stress-tested rate, and a personal cash-flow test at the real payment. Closing costs alone often run about 1.5% to 4% of the purchase price, and an appraisal often runs $300 to $500.
A monthly buffer matters more than people think. Condo special assessments, property maintenance, and utility changes are not surprises to homeowners, but they are often ignored in online affordability searches.
Use a calculator, then get an Ontario-specific pre-approval strategy
A debt-to-income ratio calculator is a good starting point, but it gives you an estimate. A pre-approval gives you the lender’s version of your GDS and TDS, calculated the way an underwriter will calculate it: stress-tested payment, 50% of condo fees, 3% of card balances, and your actual tax and heat figures.
That distinction matters most when the file is close to the line, when income is self-employed, commission, or newly landed, or when rental income is part of the plan. We pull your credit once, package the file properly, and compare where your ratios land across 35+ lenders instead of forcing one bank’s product.
Calculator results are not lending decisions. Your actual rate depends on your file and the lender, and we cannot quote a mortgage recommendation without your income, credit, debts, and property details. If your numbers are close, start with the calculators, gather your income documents and debt statements, then check how much mortgage you can afford and compare the qualification strategy rather than the headline rate.
FAQ
What debt-to-income ratio do Canadian lenders actually use?
GDS up to 39% of gross income for housing costs, and TDS up to 44% for housing plus all other debt payments. CMHC, Sagen, and Canada Guaranty all publish those maximums.
What is the 28/36 debt-to-income ratio?
It is a U.S. guideline that puts housing costs at 28% of gross income and total monthly debt at 36%. Canadian lenders do not underwrite to it.
Is 28/36 good for a mortgage in Canada?
It is a conservative budget rather than a qualification standard. A borrower at 28/36 is well inside Canadian limits and is probably shopping below what they could finance.
What is a good debt-to-income ratio for a mortgage in Canada?
Under 39% GDS and under 44% TDS qualifies at A-lenders. Under 32/40 is comfortable. Over 44% generally moves the file to an uninsured exception or an alternative lender.
Is 40% debt-to-income ratio good?
For TDS in Canada, yes. It is inside the 44% limit and approvable at A-lenders, though it leaves less cushion for a property tax or condo fee increase.
Is 42 DTI bad?
No. It is inside Canadian TDS guidelines. Credit history, income stability, and down payment carry more weight as you approach 44%.
Is 43 DTI bad?
Not in Canada. 43% TDS is under the 44% insured cap. It is tight enough that a revision to your tax or heat figure can push the file offside.
Can I get a mortgage if my DTI is above 44%?
Not on an insured mortgage. On an uninsured file it depends on lender policy, since OSFI sets no fixed limit, and B-lenders commonly go to about 50% TDS at a higher rate.
What is a 45% or 50% debt-to-income ratio?
It means 45% or 50% of gross income is committed to required debt payments. Both sit outside insured guidelines and usually point to alternative lending, debt consolidation, or a lower purchase price.
How can I lower my DTI for a mortgage?
Remove required monthly payments rather than trimming balances, avoid new financing before closing, increase verifiable income, or lower the purchase budget. Every $100 per month of debt payment is worth roughly $15,600 of mortgage.
Does debt-to-income ratio include the mortgage payment?
Yes, and it uses the stress-tested payment rather than your contract payment, which makes it larger than borrowers expect.
Do lenders use credit card minimum payments or balances?
Neither exactly. CMHC requires at least 3% of the outstanding balance to be used as the monthly payment on credit cards and unsecured lines of credit, which is often more than your statement minimum.
How is a HELOC counted in TDS?
A secured line of credit is counted using a payment based on the outstanding balance amortized over 25 years at the contract rate, not the interest-only payment you may be making.
Are condo fees included in GDS?
Yes, 50% of the condominium fees. Ground rent and site rent are included at 100%.
Is car insurance included in debt-to-income ratio?
No. Neither is daycare, groceries, or your phone bill. They matter to your budget, not to the ratios.
What income do you need for a $500,000 mortgage in Canada?
Working from 39% GDS, a 25-year amortization, a 5.99% qualifying rate, and $450 per month in taxes and heat, roughly $9,350 per month of gross income with no other debts. Add a car payment and that number rises.
How much mortgage can I get with a $120,000 salary in Canada?
About $540,000 under those same assumptions with no other debts, compared with roughly $370,000 if you applied the American 28% rule. Your actual number depends on debts, down payment, credit, and the property.
What is the difference between debt-to-income ratio and debt-to-credit ratio?
Debt-to-income measures payments against income and drives affordability. Debt-to-credit measures balances against credit limits and drives your credit score.
Did CMHC lower the limits to 35% and 42%?
Temporarily, in mid-2020. CMHC reversed that in July 2021 and the limits returned to 39% and 44%.
