Last Updated: 16th December, 2022

A debt-to-income ratio (DTI) or loan-to-income ratio (LTI) is a way for banks to measure your ability to make mortgage repayments comfortably without going into financial hardship.

While it’s an adequate stress test for approving home buyers, it doesn’t always make sense for property investors, who can simply sell their investment property if necessary.

What Is Debt-To-Income Ratio?

Your debt-to-income ratio is your total debts and liabilities divided by your gross (before tax) income.

Essentially, your DTI ratio takes into consideration your full debt exposure, ensuring you can meet your home loan repayments today and in the future.

For example, let’s say you’re a couple each earning a yearly gross income of $80,000 each ($160,000 in total), you want to borrow $500,000, and your total liabilities are:

  • $500,000 for the new mortgage
  • A credit card with a monthly limit of $2,000
  • Total debt: $502,000

The following formula would then be applied: $502,000 ÷ $160,000 = 3.14 DTI

What this means is that your total debt is 3.14 times your combined income.

What Is A Good Debt-To-Income Ratio For A Mortgage?

Each lender has its own DTI ratio that it considers safe for a home loan applicant to have. Many lenders consider a DTI ratio of six or below to be acceptable. If the DTI ratio is more than six, lenders are often hesitant to approve the home loan, as the borrower might struggle with repayments if interest rates rise or there is a change in their financial situation.

Debt-To-Income Ratio Calculator

Use the calculator below to determine your debt-to-income ratio

Disclaimer: This calculator has several assumptions and simplifications and so should be used as a guide only. Please seek independent financial advice and your own circumstances before making any decisions about your home loan repayments.

How To Use The Debt-To-Income Ratio Calculator

This calculator is divided into three sections: 1. Income Details
  • If you’re a PAYG applicant, input your gross income and any additional PAYG income
  • If you’re a self-employed applicant, input your net profit before tax and any interest and dividend addbacks.
  • You also can input rental income (the income you earn from your rental property.
2. Debts and Liabilities
  • Input details of any existing mortgages you have, credit cards, car and personal loans and the value of the new home loan you require
3. Results
  • You will get your DTI score here. Depending on your DTI score, you will get recommendations on how to proceed.

What Is The Max Debt-To-Income Ratio Accepted In Australia?

The maximum debt-to-income ratio differs from lender to lender.
  • Non-bank lenders: Non-Australian Deposit-taking Institutions (ADIs) do not always apply DTI limits, because they are unregulated by the Australian Prudential Regulation Authority (APRA). However, they will often take DTI ratio limits into consideration when assessing loans. Our Home Loan Experts have all the tools regarding our large panel of lenders.
  • ANZ: Applications where the DTI ratio is greater than 7.5 will no longer be considered home loans by ANZ.
  • Commonwealth Bank: They monitor applications with a DTI higher than 4.5, while applications that are 7 DTI or higher need to be manually approved by their credit department.
  • National Australia Bank: Their DTI ratio cap is 8 for all home loan applications.
  • Westpac: For a DTI ratio of 7 or greater, your application will be referred to their credit department for further review.
  • Other lenders: Other major and smaller banks and lenders set their own DTI ratio benchmarks, and are broadly in line with major banks.

Call us on 1300 889 743 or fill in our free enquiry form to learn more about your DTI.

We know how to get your home loan approved in this new debt-to-income ratio environment.

What Is A High Debt-To-Income Ratio?

Generally speaking, a DTI higher than six times a borrower’s’ income (6 DTI) is considered a higher risk that you will be put under financial stress if:

  • Your financial situation were to change suddenly; or
  • Interest rates were to rise dramatically.
A high DTI ratio can be a signal that the borrower has too many debts and liabilities for the amount of income they earn. On the other hand, a low DTI of six and below demonstrates a good balance between income and debt. It signals that you can manage your debts and repay loans on time without financial stress.

How Can We Help If You Have A High DTI?

In cases of a high DTI ratio, we can usually help you apply with a major lender if there’s: