To receive the best quality decisions in the shortest timeframe, here is some information on the treatment of the key inputs used to calculate a borrower’s debt service ratios.


Gross Debt Service Formula:

Principal + Interest + Taxes + HeatGross Annual Income


Total Debt Service Ratio Formula:

Principal + Interest + Taxes + Heat + Other Debt ObligationsGross Annual Income


Debt Service Ratios: CMHC normally restricts debt service ratios to 35% (GDS) and 42% (TDS).

Principal and Interest*: Payments should be based on the applicable amortization period and loan amount, including the CMHC premium.

Taxes: Include the property tax amount.

Condo Fees and Site or Ground Rent: If applicable, 50% of the condominium fees must be included in the GDS and TDS calculations. For chattel or leasehold loans, 100% of site or ground rent must be included.

Heat Costs: Mortgage professionals are expected to ask the prospective borrower what the monthly heating costs are for the subject property and use the actual heat cost records, if provided by the prospective borrower. Where no history is readily available, the heat costs used must be a reasonable estimate taking into consideration factors such as property size, location and/or type of heating system. Such estimates are to be based on a sound rationale, providing an accurate estimate that is reflective of the characteristics of the property being purchased.

Other Debt Obligations:

  • Other debt obligations include revolving credit (i.e. credit card debts, lines of credit), personal loans or car loans, etc. For unsecured lines of credit and credit cards, factor in a monthly payment amount corresponding to no less than 3% of the outstanding balance. In determining the amount of revolving credit that should be accounted for, lenders should ensure that they make a reasonable inquiry into the background, credit history and borrowing behaviour of the prospective borrower.
  • For secured lines of credit, factor in an amount corresponding to at least a monthly payment on the outstanding balance amortized over 25 years using the contract rate (or the benchmark rate if contract rate is unknown). Lenders may elect to apply their own internal guidelines where the result is at least equivalent to the above.

Rental Income: Rental income can be included in the calculation of the debt service ratios and form part of the prospective borrower’s total gross annual income. The approach used will depend on the nature of the application for mortgage loan insurance and information available. For instance, when the property is the subject of the mortgage loan insurance application :

  • up to 50% of gross rental income can form part of the borrower’s gross annual income, and taxes and heat can be excluded in the calculation of debt service ratios;
  • for a two-unit owner-occupied property, CMHC will consider up to 100% of gross rental income from the secondary suite.

For investment (rental) properties that are not the subject of the mortgage loan insurance application, net rental income can form part of the borrower’s gross annual income.

* The qualifying interest rate for all fixed, adjustable, and variable (standard or capped) rate mortgages is the greater of the contract mortgage rate or the Bank of Canada’s conventional 5- year fixed posted rate (i.e. benchmark interest rate).  The requirement applies to all mortgage terms (each component of mortgages with multiple interest rates must be qualified). The 5- year fixed posted rate is published weekly by the Bank of Canada in the series V80691335 and can be found at:

Various conditions and requirements may apply. For additional information contact your local Account Manager, Client Relations or 1-888 GOemili (1-888-463-6454).

Date Published:: March 31, 2018