What is the maximum Gross Debt Servicing Ratio allowable in Canada?

The maximum Gross Debt Servicing (GDS) Ratio allowed in Canada is indeed 39%. This ratio is a critical measure used by lenders to determine how much of a borrower's gross income is allotted to housing-related expenses, including mortgage payments, property taxes, and heating costs.

A GDS ratio of 39% means that no more than 39% of a borrower’s gross monthly income should go towards these housing-related expenses. This threshold is set to ensure that borrowers maintain financial stability and are less likely to experience payment defaults.

Additionally, financial institutions may adhere to guidelines issued by the Canada Mortgage and Housing Corporation (CMHC) or other regulatory bodies, which suggest a GDS ratio that balances the need for borrowers to afford their homes while helping to mitigate risks for lenders. Understanding this ratio is crucial for mortgage professionals, as it influences lending decisions and helps to assess a borrower's affordability in relation to their income.