Total Debt Service Ratio Definition

A total debt service ratio is simply a mathematical formula used by some lenders to provide a quick way of assessing a potential borrower’s ability to repay existing debts. The ratio encapsulates the amount of gross income that is already being spent on necessities and existing debt. The formula for calculating the TDS ratio, using annual figures for all amounts, is:

  • TDS = (Mortgage payments + Property Taxes + Debt Payments) / Gross Income