Your debt-to-income ratio, or DTI, is your total debt divided by your gross annual income. A household earning $200,000 with $1,200,000 of debt has a DTI of 6. Lenders use it alongside their serviceability test, and since February 2026 APRA limits how much new bank lending can be at a DTI of 6 or more, so high-DTI loans have become harder to get at banks.

Debt-to-income at a glance
Item Detail
Formula Total debt divided by gross annual income
What counts as debt The new loan, existing home and investment loans, car and personal loans, HECS at some lenders, and card limits
APRA limit From February 2026, no more than 20% of a bank’s new mortgage lending at DTI 6 or more, owner-occupier and investor separately
Exempt from the limit Owner-occupier bridging loans, and loans to buy or build new dwellings
Non-bank lenders Not covered by the APRA limit

How do you calculate your DTI?

Add every debt at its full limit, including the loan you are applying for, and divide by your gross income before tax. Credit cards count at their limit, not the balance. A couple earning $180,000 with an $800,000 new loan, a $20,000 car loan and two cards with $15,000 of limits have $835,000 of debt and a DTI of about 4.6.

What does the APRA limit mean for you?

It is a cap on each bank’s portfolio, not a ban on individual loans: a bank can still approve a DTI of 6 or more within its 20% allowance. In practice, banks ration those loans, so a high-DTI application may face more questions, a lower maximum or a no. APRA described the limit as pre-emptive and exempted bridging loans for owner-occupiers and loans for new homes, so buying off the plan or building is treated differently.

Who is most likely to hit DTI 6?

  • Investors adding a property to existing loans.
  • Single applicants in Sydney borrowing near their maximum.
  • Borrowers with large card limits or car loans on top of the home loan.

On our assumptions (6% rate assessed at 9%), a single applicant earning $150,000 with no other debts can borrow about $685,000, a DTI of about 4.6, so most first home buyers sit below 6. The ratio climbs quickly for investors with existing debt.

How can you lower your DTI?

  1. Reduce or close credit card limits you do not need.
  2. Pay off or consolidate small loans before applying.
  3. Buy with a larger deposit, or a guarantor, to reduce the new loan.
  4. Consider a new dwelling, which is exempt from the bank limit.
  5. Compare non-bank lenders, which set their own policies; see non-bank lenders.

How is DTI different from serviceability?

Serviceability asks whether your income covers the repayments at the rate plus a buffer, after living costs. DTI is a simple ratio that ignores the rate. You can pass serviceability and still have a high DTI, or the reverse. The serviceability buffer article explains the other test, and the borrowing power calculator estimates your limit.

Questions people ask

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

Below 6 avoids the APRA limit at banks; many lenders are comfortable well below that, and some have their own internal caps.

Does HECS count in DTI?

Some lenders include it as debt; all count its compulsory repayment in serviceability. See HECS and home loans.

Does the DTI limit apply to first home buyers?

It applies to banks’ whole portfolios, so any high-DTI borrower is affected, but most first home buyers sit below 6.

Charles Touma works out your DTI on each lender’s rules before applying, and steers high-DTI deals to lenders with room for them. A free 30-minute call covers your debts and borrowing. General information only, not credit advice; lender policies change, and your own circumstances decide what suits you.

Sources: APRA, debt-to-income limit; Moneysmart, home loans, checked 20 October 2026.

General information only, not credit, legal or tax advice. Your situation is assessed properly before any recommendation. Government scheme details change; figures are current at the time of writing.