Gross Debt Service Ratio - GDS
Definition of 'Gross Debt Service Ratio - GDS'A debt service measure that financial lenders use as a rule of thumb to give a preliminary assessment about whether a potential borrower is already in too much debt. Receiving a ratio of less than 30% means that the potential borrower has an acceptable level of debt.Calculated as: |
|
Investopedia explains 'Gross Debt Service Ratio - GDS'For example, Jack and Jill, two law students, have a monthly mortgage payment of $1,000 (annual payment of $12,000), property taxes of $3,000 and a gross family income of $45,000. This would give a GDS of 33 %. Based on the benchmark of 30%, Jack and Jill appear to be carrying an unacceptable amount of debt.Keep in mind that this ratio is only a very rough benchmark. The acceptance of a loan application is not solely determined by this ratio. Since this is a very simple ratio, there are a lot of subsequent factors that lenders consider. For example, even though Jack and Jill's GDS is above the benchmark, a lender may still lend to Jack and Jill because of their future earning potential as lawyers. When combined with other personal information, GDS can be a good way for lenders to screen borrowers. |
Related Definitions
Articles Of Interest
-
Mortgages: How Much Can You Afford?
Answering this means number-crunching as well as factoring in other considerations and expenses. -
The Benefits Of Mortgage Repayment
Buying a home may be the biggest debt you'll ever incur. Learn why you should retire it sooner, rather than later. -
Digging Out Of Personal Debt
Find out why good intentions can put consumers in an even bigger hole than before. -
6 Tips For Selling Your Home Fast
Find out what you can do to stand out from the competition and make your home an easy sell. -
5 Smart Ways To Use Your Tax Return
This year, find out how to stretch your tax refund further to strengthen your future. -
Common Liabilities That Hurt Your Net Worth
Every penny that you keep out of the liability side of the net worth equation essentially ends up on the asset side. -
The Dangers Of A Reverse Mortgage
In many circumstances, a reverse mortgage can be a risk to your financial security. Here are six dangers you should consider before signing on the bottom line. -
Automatic Cancellation Of PMI When You're Underwater On Your Mortgage
You might be suprised to learn that after reaching certain criteria, your PMI will be automatically cancelled. -
What Homeowners Need To Know About Zombie Titles
Understanding how the foreclosure process normally works - and how it dysfunctions in today’s market - will help you avoid becoming a victim. -
Profit From Mortgage Debt With MBS
Mortgage-backed securities can offer monthly income, a fixed interest rate and even government backing.
Free Annual Reports