How a line of credit affects a mortgage application
Lenders consider factors like a borrower’s creditworthiness, income and existing debt before lending them money.
When it comes to mortgages, they want to know what percentage of your income will be spent on housing costs, to ensure you can afford your future mortgage payments. This is called the gross debt service ratio (GDS), and it is based on your mortgage principal and interest, taxes, heating costs and condo fees (if applicable) divided by your income.
But lenders also want to know that you will be able to pay your mortgage in addition to all your other existing debt. To figure this out, they use what’s called the total debt service ratio (TDS)…