DTI Explained: Why Debt-to-Income Ratio Matters for Borrowing Power

Debt-to-income ratio (DTI) is your total debt divided by your gross annual income. If you earn $100,000 and would owe $550,000 on a new home loan plus $50,000 on a car loan, your DTI is $600,000 ÷ $100,000 = 6. Lenders use DTI alongside their serviceability test, and a DTI of 6 or more is treated as high-risk lending.

Check yours: the Borrowing Power Calculator shows the DTI of your estimate and warns at 6 or more.

APRA's DTI limit

APRA limits how much high-DTI lending banks can do: up to 20% of new owner-occupier and investment loans can be at a DTI of 6 or more. APRA confirmed this setting, and its 3 percentage point serviceability buffer, on 28 May 2026 (APRA, checked 1 October 2026). It isn't a ban — banks can still approve some loans at 6 or more — but those loans compete for a limited share, so expect stricter checks, a smaller loan or a decline.

How DTI is worked out

Part	What counts
Debt	The new home loan plus existing debts — car and personal loans, HELP, and often credit card limits
Income	Gross (before-tax) income lenders accept, which may shade bonuses, overtime and rental income

Because credit card limits can count as debt, closing an unused card can lower your DTI as well as your serviceability commitments — see credit card limits and borrowing power.

Examples

Situation	Total debt	Income	DTI
Single, $90,000, borrowing our model's estimate	$313,000	$90,000	3.5
Couple, $195,000, borrowing our model's estimate	$679,000	$195,000	3.5
Single, $100,000, $550,000 loan + $50,000 car loan	$600,000	$100,000	6.0 — at APRA's high-DTI level
Couple, $195,000, $1,170,000 of debt	$1,170,000	$195,000	6.0

At today's assessment rate (your rate plus 3 percentage points), most borrowers hit the lender's serviceability limit well before a DTI of 6. High DTIs mostly arise with large deposits on expensive homes, investors with several loans, or low assessment rates — which is when APRA's limit starts to bite.

Ways to lower your DTI

• Pay down or close other debts — car loans, personal loans and unused credit cards.
• Borrow less: a larger deposit or a lower price reduces the loan and the DTI.
• Add income the lender will accept, for example a co-borrower's income on a joint application.

Frequently asked questions

What is a good debt-to-income ratio for a home loan?

Below 6 avoids APRA's high-DTI category. Many lenders are comfortable well below that; the right level depends on the lender and your serviceability.

Is a DTI of 6 the maximum in Australia?

No. It's the level at which loans count towards APRA's 20% limit on high-DTI lending, so banks can still lend above it, but less often and with more scrutiny.

Does my credit card limit count in DTI?

Often yes — many lenders include credit card limits as debt, even with a $0 balance.

Related

• Borrowing power: how much can I borrow?
• Does HECS/HELP reduce borrowing power?
• Credit card limits and borrowing power

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Important: General information only, not credit advice. Lenders' policies differ; your actual borrowing capacity is set by the lender.