TDSR Calculator
Use this tool to calculate your Total Debt Servicing Ratio (TDSR). This ratio is a key metric used by lenders to assess your ability to manage monthly debt payments based on your gross monthly income.
Enter your Gross Monthly Income and your Total Monthly Debt Payments below to find your TDSR percentage.
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Understanding Your TDSR
What is TDSR?
TDSR stands for **Total Debt Servicing Ratio**. It's a percentage that compares your total monthly debt payments to your gross monthly income. It helps lenders determine how much of your income is already committed to paying off debt.
TDSR Formula
The formula is straightforward:
TDSR = (Total Monthly Debt Payments / Gross Monthly Income) * 100%
A lower TDSR indicates you have more income available after servicing your debts, which is generally viewed favorably by lenders.
Why is TDSR Important?
Lenders use TDSR (often along with GDS - Gross Debt Service Ratio, and other factors) to assess your financial health and ability to take on additional debt, such as a mortgage. There are typically maximum TDSR limits that borrowers must meet to qualify for loans.
TDSR Calculation Examples
See how different scenarios affect the TDSR:
Example 1: Standard Scenario
Scenario: An individual with a steady income and moderate debt.
1. Known Values: Gross Monthly Income = $4,000, Total Monthly Debt Payments = $1,200.
2. Formula: TDSR = (Total Monthly Debt Payments / Gross Monthly Income) * 100%
3. Calculation: TDSR = ($1,200 / $4,000) * 100% = 0.3 * 100%
4. Result: TDSR = 30%.
Conclusion: This TDSR is likely within acceptable limits for most lenders.
Example 2: Low Debt
Scenario: An individual with high income and very little debt.
1. Known Values: Gross Monthly Income = $7,500, Total Monthly Debt Payments = $500.
2. Formula: TDSR = (Total Monthly Debt Payments / Gross Monthly Income) * 100%
3. Calculation: TDSR = ($500 / $7,500) * 100% ≈ 0.0667 * 100%
4. Result: TDSR = 6.67%.
Conclusion: A very low TDSR, indicating strong capacity for managing debt.
Example 3: High Debt
Scenario: An individual with moderate income but significant debt payments.
1. Known Values: Gross Monthly Income = $3,000, Total Monthly Debt Payments = $1,800.
2. Formula: TDSR = (Total Monthly Debt Payments / Gross Monthly Income) * 100%
3. Calculation: TDSR = ($1,800 / $3,000) * 100% = 0.6 * 100%
4. Result: TDSR = 60%.
Conclusion: This TDSR is likely too high for conventional loan approval.
Example 4: Borderline Scenario
Scenario: An individual close to typical lender limits.
1. Known Values: Gross Monthly Income = $6,000, Total Monthly Debt Payments = $2,500.
2. Formula: TDSR = (Total Monthly Debt Payments / Gross Monthly Income) * 100%
3. Calculation: TDSR = ($2,500 / $6,000) * 100% ≈ 0.4167 * 100%
4. Result: TDSR = 41.67%.
Conclusion: This TDSR is near or possibly slightly above common limits (often around 40-44%), depending on the lender and other factors.
Example 5: Zero Debt
Scenario: An individual with income and no monthly debt payments.
1. Known Values: Gross Monthly Income = $3,500, Total Monthly Debt Payments = $0.
2. Formula: TDSR = (Total Monthly Debt Payments / Gross Monthly Income) * 100%
3. Calculation: TDSR = ($0 / $3,500) * 100% = 0 * 100%
4. Result: TDSR = 0%.
Conclusion: The ideal TDSR, showing no current burden from scheduled debt payments.
Example 6: Impact of Income Increase
Scenario: Same debt as Example 3, but income increases significantly.
1. Known Values: Gross Monthly Income = $5,000, Total Monthly Debt Payments = $1,800.
2. Formula: TDSR = (Total Monthly Debt Payments / Gross Monthly Income) * 100%
3. Calculation: TDSR = ($1,800 / $5,000) * 100% = 0.36 * 100%
4. Result: TDSR = 36%.
Conclusion: Increasing income dramatically lowered the TDSR from 60% (Example 3) to 36%, likely bringing it within acceptable ranges.
Example 7: Impact of Debt Decrease
Scenario: Same income as Example 4 ($6,000), but debt is reduced.
1. Known Values: Gross Monthly Income = $6,000, Total Monthly Debt Payments = $1,500.
2. Formula: TDSR = (Total Monthly Debt Payments / Gross Monthly Income) * 100%
3. Calculation: TDSR = ($1,500 / $6,000) * 100% = 0.25 * 100%
4. Result: TDSR = 25%.
Conclusion: Reducing debt significantly lowered the TDSR from 41.67% (Example 4) to 25%.
Example 8: Self-Employed Income
Scenario: Calculating TDSR with self-employed income (often averaged or net). For this example, we'll use gross.
1. Known Values: Gross Monthly Income (averaged) = $5,500, Total Monthly Debt Payments = $2,000.
2. Formula: TDSR = (Total Monthly Debt Payments / Gross Monthly Income) * 100%
3. Calculation: TDSR = ($2,000 / $5,500) * 100% ≈ 0.3636 * 100%
4. Result: TDSR = 36.36%.
Conclusion: Within a typical acceptable range, but lenders may have specific requirements for verifying self-employed income.
Example 9: Planning for a New Loan
Scenario: An individual wants to see their TDSR if they take on a new car loan with a $400 monthly payment.
1. Known Values: Current Gross Monthly Income = $4,500, Current Total Monthly Debt Payments = $800. Proposed New Debt Payment = $400. Proposed Total Monthly Debt Payments = $800 + $400 = $1,200.
2. Formula: TDSR = (Proposed Total Monthly Debt Payments / Gross Monthly Income) * 100%
3. Calculation: TDSR = ($1,200 / $4,500) * 100% ≈ 0.2667 * 100%
4. Result: TDSR = 26.67%.
Conclusion: Even with the new loan, their TDSR remains low, indicating good capacity for the additional debt.
Example 10: Zero Income
Scenario: Attempting to calculate TDSR with zero income.
1. Known Values: Gross Monthly Income = $0, Total Monthly Debt Payments = $500.
2. Formula: TDSR = (Total Monthly Debt Payments / Gross Monthly Income) * 100%
3. Calculation: Division by Zero ($500 / $0).
4. Result: Undefined / Error.
Conclusion: The calculator will flag this as an error, as TDSR is not applicable or calculable with zero income. Lenders require demonstrable income.
Frequently Asked Questions about TDSR
1. What is TDSR?
TDSR stands for Total Debt Servicing Ratio. It's a percentage that shows how much of your gross monthly income is used to cover your total monthly debt payments.
2. How is TDSR calculated?
TDSR is calculated by dividing your total monthly debt payments by your gross monthly income and multiplying the result by 100 to get a percentage: (Total Monthly Debt Payments / Gross Monthly Income) * 100%.
3. What is considered Gross Monthly Income?
Gross monthly income is your total income before any taxes, deductions, or expenses are taken out. This can include salary, wages, bonuses, commissions, and other verifiable sources of income.
4. What types of debt payments are included in the calculation?
Common debts included are: estimated new mortgage payments (principal, interest, taxes, heat - P.I.T.H), existing mortgage payments, credit card minimum payments, lines of credit minimum payments, car loan payments, student loan payments, and any other regular loan obligations.
5. What is an acceptable TDSR?
This varies by lender and region. In many places, a TDSR of 40-44% or below is generally considered acceptable, especially for mortgage qualification. However, other factors like credit score, down payment, and overall financial stability are also assessed.
6. Why do lenders use TDSR?
Lenders use TDSR as a key risk assessment tool. A high TDSR suggests that a large portion of your income is already going towards debt, potentially leaving less room for unexpected expenses or new loan payments, increasing the risk of default.
7. How can I lower my TDSR?
You can lower your TDSR by increasing your gross monthly income (e.g., salary increase, second job) or by decreasing your total monthly debt payments (e.g., paying off loans, reducing credit card balances).
8. Does TDSR include living expenses like food, utilities, or insurance?
No, TDSR focuses only on scheduled debt payments. Living expenses like groceries, utilities (other than heat included in P.I.T.H), insurance premiums (other than property tax & insurance included in P.I.T.H), and discretionary spending are not directly part of the TDSR calculation, although they are part of your overall budget.
9. Is TDSR the only factor lenders consider?
No. While crucial, TDSR is just one part of a lender's evaluation. They also consider your Gross Debt Service Ratio (GDS), credit score, credit history, employment stability, assets, liabilities, and the loan-to-value ratio.
10. What is the difference between GDS and TDSR?
GDS (Gross Debt Service Ratio) typically only includes housing-related costs (mortgage principal, interest, property taxes, heat, and sometimes condo fees) compared to gross monthly income. TDSR includes GDS *plus* all other monthly debt payments (car loans, lines of credit, credit cards, etc.) compared to gross monthly income.
