What does the Total Debt Service Ratio indicate?

The Total Debt Service Ratio (TDS) is a crucial financial metric used to assess a borrower's ability to manage their debt. It specifically measures the total monthly debt obligations as a percentage of a borrower’s gross income. This includes not only housing costs—such as mortgage payments, property taxes, utilities, and other home-related expenses—but also other debts like credit card payments, personal loans, and car loans.

Having a clear understanding of the TDS ratio is essential for lenders, as it helps them evaluate the risk of lending to a borrower. A lower TDS ratio typically indicates that the borrower has a more manageable level of debt relative to their income, implying a higher likelihood of repayment. Conversely, a higher ratio could signal potential financial strain, which may deter lenders from approving the loan.

In this context, the other options relate to different aspects of financial assessment but do not accurately define the TDS Ratio. The borrower's credit score reflects their creditworthiness but does not capture total debt obligations. The percentage of income that goes toward housing costs only is referred to as the Gross Debt Service Ratio, which is narrower in scope than the TDS. Lastly, the value of the property securing the loan pertains to the collateral aspect and does not relate to