gross debt service ratio (GDS)


A calculation used by lenders to determine if a borrower is able to afford making payments on a debt. This metric is typically used in the home loan industry. The equation for determining the gross debt service ratio is: GDS = TMP / GMI x 100. Where:

GDS = gross debt service, TMP = total monthly payments, and GMI = total monthly income

For example, a borrower might be seeking a home loan with monthly payments of $1000. Assuming the borrower's gross income is $4000 per month, 1000 / 4000 = .25 x 100 = 25%. Lenders often consider a borrower with a gross debt service ratio of over 30% a poor risk.

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