Debt-to-income ratio, or DTI, compares debt with annual income. It can show the scale of borrowing before an application. It cannot tell you whether monthly repayments fit or whether a lender will approve a loan.
The distinction matters because APRA's DTI policy concerns banks' new residential mortgage lending. Its six-times-income threshold is part of a portfolio limit, not a universal maximum loan size for an individual and not a blanket car or personal loan rule.
Start with a dated debt inventory
List the borrowers responsible for the proposed loan. Gather current mortgage and loan balances, approved revolving limits and the proposed new credit amount. Record the date and source of each figure.
Use annual gross income for the working example below and label that choice. Do not mix one person's debt with two people's income, or monthly income with annual debt. A lender's formal definitions may treat particular facilities or income differently. Ask what it includes before treating your worksheet as its DTI calculation.
Work through the arithmetic
Assume a household has a $520,000 mortgage, a $20,000 car loan, $20,000 in card limits and $140,000 annual gross income. For this working estimate, include those card limits:
- Debt included: $520,000 + $20,000 + $20,000 = $560,000.
- Working DTI: $560,000 / $140,000 = 4.0 times.
- Add an assumed new $30,000 loan: $590,000 / $140,000 = about 4.21 times.
This does not model fees, joint-liability allocation or a lender's income adjustments. If an existing loan will be paid out from the new advance, show that separately so you do not count both as ongoing debt.
Understand the APRA limit correctly
APRA explains that each authorised deposit-taking institution can have up to 20% of its new owner-occupier mortgage lending, and separately up to 20% of new investor mortgage lending, at DTI of six or more, measured quarterly. The policy has implementation details and exclusions; read APRA's explanation for its scope.
A ratio below six is not an approval. A ratio at or above six is not an automatic universal refusal. Do not multiply salary by six and treat the result as a pre-approval.
Put repayment capacity beside the ratio
Two households with the same DTI can have different terms, rates, childcare costs and income stability. Build a second worksheet showing after-tax income, living costs and current and proposed repayments. Our household expense guide covers that side.
If a card limit is material, the credit limit guide explains why balance and available limit differ. For car finance, our borrowing power guide organises the broader questions. Keep DTI as a dated discussion tool rather than turning it into a lending decision.
