Debt to Income Ratio (DTI)
Total debt divided by gross annual income, used by lenders as a supplementary risk measure alongside serviceability.
In detail
DTI captures every liability a borrower holds including the proposed new loan, credit card limits, car finance, personal loans, HECS HELP balances, and existing mortgages. Dividing that total by gross annual household income produces a multiple. A borrower with $900,000 of total debt and $150,000 of gross household income has a DTI of 6.
APRA flags loans above 6 times DTI as higher risk and banks report them in their quarterly lending statistics. Many lenders now apply their own DTI caps between 6 and 9, with tighter caps for investment lending and interest only lending.
Why it matters for brokers
A file can pass serviceability but still fail a DTI policy cap. Knowing the DTI ceiling at each lender helps brokers avoid wasted effort on files that will be declined by policy rather than affordability.
Example in practice
A couple with combined income of $180,000 want to borrow $1.3 million. They have a $15,000 credit card limit and a $25,000 car loan. Total debt is $1.34 million, giving a DTI of 7.4. At a lender with a DTI cap of 7 the application fails policy. At a lender with a cap of 8 it proceeds to serviceability assessment.
Related terms
Serviceability
A lender assessment of whether a borrower can meet loan repayments from their income after accounting for expenses, existing debts, and a buffer.
Credit Card Limit
The maximum amount a credit card holder can spend on a card, whether or not the balance is drawn.
HECS HELP Debt
A debt owed to the Commonwealth for higher education tuition, repaid through the tax system once income exceeds a threshold.
Responsible Lending
The legal framework under the National Consumer Credit Protection Act requiring lenders and brokers to assess whether a loan is not unsuitable for the borrower.
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