How DTI is calculated
A simple DTI divides total debt by gross annual income. Total debt can include the proposed mortgage, existing property loans, personal loans and credit-card limits under the lender's method.
Why lenders use it
DTI helps identify highly leveraged applications whose repayments may be more exposed to rate rises, vacancies or income changes. Policy thresholds and exceptions vary by lender.
DTI and serviceability are different
A borrower can have a moderate DTI but fail serviceability because of expenses, or a higher DTI with strong cash flow. Lenders assess both measures rather than relying on one ratio.
Key points
- DTI compares debt with gross income
- It does not measure monthly cash flow
- Lender methods and limits vary
- Reducing unused credit limits may help in some assessments
Frequently asked questions
What is a good debt-to-income ratio?
There is no universal approval number. Lenders apply their own thresholds and consider the whole application.
Are credit card limits included?
Many lenders assess a repayment against the approved limit, even when the current balance is low or zero.