What is a good debt-to-income ratio in Canada?

For mortgages, lenders want GDS under 39% and TDS under 44%. For overall financial health, keeping total debt payments under 36% of gross income is considered good. Under 28% is excellent.

How do I calculate my debt-to-income ratio?

Add up all monthly debt payments (mortgage/rent, car, credit cards, loans), divide by gross monthly income, multiply by 100. If payments are $2,000 and income is $6,000, DTI is 33%.

Does debt-to-income ratio affect credit score?

Not directly. Credit scores look at credit utilization (debt vs credit limits), not income. However, high DTI often correlates with high utilization and can lead to missed payments, which hurt your score.

Debt-to-Income Ratio Canada | Complete Guide

Use this page with the budgeting hub and the debt strategies hub if you are trying to lower monthly obligations before a major application like a mortgage pre-approval.

What is Debt-to-Income Ratio?

The Basic Formula

Calculation
DTI =	(Monthly debt payments ÷ Gross monthly income) × 100

Example

Factor	Amount
Monthly debt payments	$2,000
Gross monthly income	$6,000
DTI	33%

Types of Debt Ratios

Canada’s Two Key Ratios

Ratio	What It Measures
GDS	Housing costs only
TDS	All debt payments

GDS (Gross Debt Service)

Includes
Mortgage payment	P+I
Property tax	Monthly
Heating costs	Estimated
50% of condo fees	If applicable

Formula	GDS = Housing costs ÷ Gross income
Maximum	39% for most lenders

TDS (Total Debt Service)

Includes
All of GDS	Housing
+ Car payments	Monthly
+ Credit card minimum	Usually 3%
+ Student loans	Monthly
+ Other loans	All payments

Formula	TDS = All debt payments ÷ Gross income
Maximum	44% for most lenders

How to Calculate Your DTI

Step 1: List Monthly Debt Payments

Debt	Monthly Payment
Mortgage/Rent	$
Car loan	$
Credit card minimum	$
Student loan	$
Personal loan	$
Line of credit	$
Other debt	$
Total	$

Step 2: Calculate Gross Monthly Income

Income Source	Monthly
Salary (before tax)	$
Spouse income	$
Side income	$
Other income	$
Total Gross	$

Step 3: Calculate

Calculation
Total debt payments	÷
Gross income	× 100
Your DTI	%

DTI Benchmarks

General Financial Health

DTI	Rating
Under 28%	Excellent
28-35%	Good
36-42%	Acceptable
43-49%	High
50%+	Very high

Mortgage Qualification

Ratio	Maximum
GDS	39%
TDS	44%
Some lenders	May allow higher with good credit

Example: Are You Qualified?

Income	$7,000/month gross
GDS limit (39%)	$2,730 max housing
TDS limit (44%)	$3,080 max all debt

DTI by Scenario

Scenario 1: Single, Good Health

Factor	Amount
Gross income	$5,500/month
Rent	$1,600
Car payment	$400
Student loan	$250
Credit card	$150
Total debt	$2,400
DTI	44%

Verdict: At the limit for mortgage approval.

Scenario 2: Dual Income, Moderate Debt

Factor	Amount
Combined income	$10,000/month
Mortgage	$2,200
Property tax	$400
Car loan	$500
Total debt	$3,100
DTI	31%

Verdict: Good position.

Scenario 3: High Debt

Factor	Amount
Gross income	$6,000/month
Rent	$1,800
Car	$600
Credit cards	$500
Student loan	$400
Personal loan	$300
Total debt	$3,600
DTI	60%

Verdict: Dangerously high, limits options.

Why DTI Matters

For home buyers, DTI is one side of the underwriting equation and credit profile is the other; review both with the mortgage affordability guide and credit score mortgage requirements.

For Mortgage Approval

High DTI	Consequence
Over limits	Denied mortgage
Near limits	Smaller approval
Lower mortgage	Less house

For Financial Health

High DTI	Impact
Over 50%	Little room for savings
Over 43%	Financial stress
Under 36%	Breathing room
Under 28%	Significant flexibility

Improving Your DTI

Two Approaches

Method	Action
Reduce debt	Pay off loans, cards
Increase income	Raise, promotion, side hustle

Reducing Debt

Strategy	Impact
Pay off credit cards	Immediate DTI reduction
Pay off car loan	Significant reduction
Consolidate at lower rate	Lower payment
Debt avalanche	Fastest interest savings

Example: Paying Off Car

Before	After
Income: $5,500	Income: $5,500
Total debt: $2,400	Total debt: $2,000
DTI: 44%	DTI: 36%
Improvement	8 points

Increasing Income

Method	Impact
Ask for raise	Permanent DTI improvement
Side hustle	Additional income
Spouse returns to work	Doubles income

Example: Income Increase

Before	After
Income: $5,500	Income: $6,500
Total debt: $2,400	Total debt: $2,400
DTI: 44%	DTI: 37%
Improvement	7 points

DTI vs Credit Utilization

Different Measures

Metric	Compares
DTI	Debt payments vs income
Credit utilization	Balance vs credit limit

Credit Utilization

Calculation
Balance	÷ Credit limit
$3,000 balance	÷ $10,000 limit
	= 30% utilization

Impact on Credit Score

Utilization	Impact
Under 30%	Good
Under 10%	Excellent
Over 30%	Hurts score
Over 75%	Significant damage

DTI for Different Goals

Mortgage Application

Target	Ratios
GDS	Under 39%
TDS	Under 44%
Ideal	Under 32%/36%

Car Loan

Target DTI	Rating
Under 40%	Good approval odds
40-50%	May need higher rate
Over 50%	May be declined

Personal Loan

Lender Type	DTI Preference
Banks	Under 40%
Online lenders	May accept higher
Credit unions	Varies

Red Flags

Warning Signs

Situation	Action Needed
DTI over 50%	Immediate attention
Using debt for basics	Emergency
Minimum payments only	Debt spiral risk
Declined for credit	Reassess budget

DTI Calculator Worksheet

Your Calculation

Debts	Monthly
Housing	$
Car	$
Credit cards	$
Student loans	$
Other	$
Total A	$

Income	Monthly
Primary	$
Secondary	$
Other	$
Total B	$

Your DTI	A ÷ B × 100 = %