If you are buying a home with a suite, keeping your current home as a rental, or already own a rental property, mortgage qualification can get confusing fast. The frustrating part is that you can do everything “right” and still get very different answers depending on which lender you talk to. Here’s a simple breakdown so you understand it and don’t miss out. What are Debt Service Ratios? In Canada, lenders qualify you using two main ratios: Gross Debt Service (GDS) This looks at housing costs only , typically: Mortgage payment Property taxes Heating 50% of strata fees (if applicable) GDS typically needs to be 39% or less of your gross income. Total Debt Service (TDS) This includes everything in GDS , plus other debts like: Car loans Credit cards Lines of credit Student loans TDS typically needs to be 44% or less of your gross income. These ratios are the foundation. If they do not work, the lender will not approve the mortgage, even with strong credit and a solid down payment. How Lenders Treat Rental Income Most people assume lenders look at rental properties based on simple cash flow (rent minus mortgage payment). In reality, most lenders use one of two methods: 1) Addback A percentage of the rental income is added to your gross income for qualification purposes. 2)Offset A percentage of the rental income is subtracted from the mortgage payment tied to the rental property. Different lenders use different percentages and different worksheets. That is why the same borrower can qualify with one lender and fail with another. Benefits of Understanding Lender Methods When you understand how rental income is calculated, you can: Avoid being under-qualified by a lender with conservative rules Get a more accurate picture of your real purchasing power Choose a lender that fits your situation (instead of forcing your situation to fit the lender) Important Considerations A few key points to keep in mind: Rental income is rarely counted at 100% , but some lenders are more generous than others. The method matters just as much as the percentage (addback vs offset). If you own multiple properties, lender worksheets can change the result dramatically. Your lender choice is a strategy decision , not just a rate decision. Real-World Example: Same Clients, Two Very Different Outcomes Here’s an example comparing lenders Scotiabank and Strive, using a fictitious couple: Scenario Household income: $160,000 Existing townhome: $800,000 value with a $525,000 mortgage ( $2,500/month payment) Market rent for the townhome: $3,400/month New purchase: property with a rental suite generating $1,800/month Down payment: 10% Other debts: student loan $165/month , car loan $500/month How Scotiabank viewed it For the townhome rental, they counted half the rent and subtracted the mortgage payment, leaving an $800/month shortfall that gets added into the debt ratios. For the new purchase, 50% of the suite income gets added to income. Max mortgage : $650,700 Max purchase price : $723,000 How Strive viewed it For the townhome rental, Strive used a rental worksheet and calculated $5.20/month of income that can be added to the application. For the new purchase, 100% of the suite income gets added to income, and they did not need to include taxes or heat. Max mortgage : $878,400 Max purchase price : $976,000 The result That’s a $253,000 difference in purchasing power , with the same clients, same income, same debts, and same properties. The difference was lender policy. Quick Summary GDS and TDS ratios are the backbone of mortgage qualification. Rental income is usually counted using Addback or Offset , and each lender handles this differently. Two lenders can produce wildly different results, even with the exact same file. In the example above, lender choice created a $253,000 swing in purchasing power. Next Steps If you are planning to: Buy a home with a suite Keep your current home and convert it to a rental Use rental income to qualify Reach out and I will run the numbers across multiple lenders so you see what you actually qualify for, not just what one lender will allow. Need help with your mortgage? Book a consultation or call 778-988-8409 . Glossary Addback : A method where a lender adds a percentage of rental income to your gross income for qualification. Gross Debt Service (GDS) : The ratio that measures housing costs as a percentage of gross income. Offset : A method where a lender subtracts a percentage of rental income from the rental property’s mortgage payment for qualification. Total Debt Service (TDS) : The ratio that measures housing costs plus other debts as a percentage of gross income.