Your debt-to-income ratio is one of the first numbers a lender looks at, and one of the most useful numbers you can track yourself. It shows how much of your income already goes to debt payments. Knowing how to calculate your debt-to-income ratio in Canada helps you see whether you can take on a new loan, qualify for a mortgage, or whether it is time to focus on paying debt down.
What is a debt-to-income ratio?
A debt-to-income ratio (DTI) compares your monthly debt payments to your gross monthly income, before taxes. The result is a percentage. A lower ratio means more breathing room in your budget; a higher ratio means your income is already stretched.
In Canada, mortgage lenders mostly use two specific versions of this idea:
- GDS (Gross Debt Service) ratio: housing costs only.
- TDS (Total Debt Service) ratio: housing costs plus all other debt payments.
How to calculate your debt-to-income ratio
The basic formula
DTI = (total monthly debt payments ÷ gross monthly income) × 100
Include payments such as:
- rent or mortgage payment;
- car loan or lease;
- student loan payments;
- minimum credit card payments;
- line of credit payments;
- personal loan payments.
Do not include everyday living costs like groceries, phone or gas for the car. Those matter for your budget, but they are not debt payments.
Example
| Item | Monthly amount |
|---|---|
| Gross monthly income | $6,000 |
| Rent | $1,800 |
| Car loan | $450 |
| Student loan | $250 |
| Credit card minimum payments | $150 |
| Total debt payments | $2,650 |
DTI = $2,650 ÷ $6,000 × 100 = 44.2%. Without rent, the non-housing debt ratio is $850 ÷ $6,000 = about 14.2%.
GDS and TDS: the mortgage version
GDS = (mortgage payment + property taxes + heating + 50% of condo fees) ÷ gross monthly income.
TDS = (all GDS costs + all other debt payments) ÷ gross monthly income.
For insured mortgages, the Canada Mortgage and Housing Corporation sets maximums of 39% GDS and 44% TDS. Lenders also apply the mortgage stress test, which means they calculate these ratios using a qualifying rate that is higher than your actual rate. Individual lenders can apply stricter limits.
You can find official information on mortgages and borrowing from the Financial Consumer Agency of Canada.
What is a good debt-to-income ratio?
There is no single official cut-off for every situation, but these general ranges help you read your number:
- Under 36% total: generally comfortable, with room for savings and surprises.
- 36% to 44%: manageable for many households, but tight if income drops.
- Over 44%: above the usual mortgage limit; a sign that debt is taking too large a share of income.
If your non-housing debts alone take more than 20% of gross income, credit card balances and loans are likely slowing down every other goal.
How to lower your debt-to-income ratio
- Pay down high-interest debt first. Credit cards usually cost the most. Our step-by-step guide on how to pay off credit card debt in Canada shows where to start.
- Choose a payoff method. Compare the debt snowball vs debt avalanche to stay motivated or save the most interest.
- Consolidate if it lowers your payments and your rate. See how debt consolidation in Canada works and when it helps.
- Avoid new debt while you are working on the ratio, especially before applying for a mortgage.
- Increase income where possible: a raise, extra shifts or a side income all lower the ratio.
If payments already feel impossible, a non-profit credit counsellor can review your options, including a debt management plan. To run the numbers on loans, savings and taxes, try these free Canadian financial calculators.
Debt-to-income ratio FAQ
Do lenders use gross or net income?
Canadian lenders generally use gross income, before taxes and deductions.
Does my debt-to-income ratio affect my credit score?
Not directly. Your credit score looks at payment history and how much of your available credit you use, not your income. But a high ratio often goes with high balances, which can lower your score.
Should I include my rent?
For your own total DTI, yes. For a mortgage application, the lender replaces your rent with the costs of the home you want to buy.
How often should I check my ratio?
Every few months, and always before applying for a mortgage, car loan or new credit card.
