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 putting you in 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 they need to.

What is a debt-to-income ratio?

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

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.


Which lenders apply a DTI ratio limit?

  • 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 9 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 9 for all home loan applications and their Loan to Income ratio (LTI) cap is 7.
  • Westpac: For 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 formto find out more about your DTI.

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


Is this considered to be a high DTI?

In the above case, this would generally be acceptable to most lenders.

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

  • Your financial situation was to change suddenly; or
  • Interest rates were to rise dramatically.

How can we help if you have high DTI?

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

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