What does the gross debt service ratio (GDSR) specifically measure?

The gross debt service ratio (GDSR) specifically measures the percentage of a borrower's income that is allocated to housing costs. This includes all costs associated with housing, such as mortgage payments, property taxes, and heating expenses. Lenders often use GDSR as a key criterion to evaluate a borrower’s ability to manage monthly housing expenses in relation to their income. A lower GDSR indicates that the borrower has a greater capacity to handle their housing costs without becoming financially overextended, which reduces the lender's risk.

Knowing the GDSR is critical for mortgage agents, as it helps determine whether a potential borrower meets lender guidelines for housing affordability. This concept is distinct from other metrics that might assess overall financial health or total debt, as it focuses specifically on housing-related expenses relative to income. Understanding this ratio plays a significant role in financial planning and securing mortgage approvals.