Total Debt Service Ratio - TDS
 |
Definition of 'Total Debt Service Ratio - TDS'
A debt service measure that financial lenders use as a rule of thumb to give a preliminary assessment of whether a potential borrower is already in too much debt. More specifically, this ratio shows the proportion of gross income that is already spent on housing-related and other similar payments.
Receiving a ratio of less than 40% means that the potential borrower has an acceptable level of debt.
|
 |
Investopedia explains 'Total Debt Service Ratio - TDS'
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, credit card balances totaling $1,000 and a gross family income of $45,000. This would give a TDS of around 36%. Based on the benchmark of 40%, Jack and Jill appear to be carrying an acceptable amount of debt.
This ratio is very similar to the gross debt service ratio (GDS) except that the GDS does not account for non-housing related payments. TDS allows for a slightly more detailed view of a potential borrower's financial situation.
|
-
Find out why good intentions can put consumers in an even bigger hole than before.
Read More »
-
Answering this means number-crunching as well as factoring in other considerations and expenses.
Read More »
-
Buying a home may be the biggest debt you'll ever incur. Learn why you should retire it sooner, rather than later.
Read More »
|
|
