Want a better understanding of how debt-to-income ratios can affect your mortgage application? Read on to find out more. Show
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 Which lenders have you already tried?Select the tiles below to continue: With the unpredictability of the mortgage market, we want you to have complete confidence in our service, and trust that you're getting the best available rate and the highest chance of mortgage approval. If you're concerned or confused about what to do next, Get In Touch and we'll match you with a Specialist who'll give you the right advice for you and your circumstance. One of the factors that lenders look at as part of your mortgage affordability assessment is your debt-to-income ratio. Outside of mortgage applications, this isn’t a term that is widely used, so you might not be totally sure what it means. This guide will explain what a debt-to-income ratio is, how it is calculated, and how it affects your mortgage application. There’s also some advice on how to approach applications if your debt-to-income ratio is high. What are you looking for? What is a debt-to-income ratio?A debt-to-income (DTI) ratio reflects the proportion of your monthly income that is spent on paying off existing debts, such as car finance, credit card debt, and personal loans. For example, if your monthly income is £2,000 and you spend £500 paying off debts, your debt-to-income ratio is 500/2,000, or 25%. To calculate your own debt-to-income ratio, you need two numbers: Your gross monthly incomeThis is your total income before tax and any other deductions. If you are paid an annual salary, simply divide that number by 12. If you have a variety of income types (e.g. freelance work, contract work, overtime, commission and bonuses, benefit income, pension income, spousal support, or stipend income), total them together. Your recurring monthly debtThis is the total of all your regular monthly repayments, such as student loans, mortgage repayments, personal loans, credit card debt, car finance, etc. If you’re on a debt management plan, it would include these payments. Speak to an expert about how your debt-to-income ratio affects mortgagesGet Started Ask Us A Question Ask Us A Question We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in all different mortgage subjects. Ask us a question and we'll get the best expert to help. Debt-to-income ratio calculatorInput those two numbers into our debt-to-income ratio calculator to see your DTI as a percentage. You’ll also see whether your DTI is classed as low, medium, or high by most mortgage lenders. Debt to Income Ratio CalculatorYou can use our debt-to-income (DTI) ratio calculator to work out how much of your income is going towards your fixed outgoings, expressed as a percentage. Based on that percentage, this tool will tell you whether mortgage lenders will class your DTI as low, medium or high. Monthly take-home income
The amount you get paid each month, after any taxes or contributions have been deducted Monthly debt payments
Be sure to include all of your fixed outgoings, as well as any loans or credit card payments you make Your Debt to Income Ratio is %Good news! Most mortgage lenders will class your debt-to-income ratio as low. You’re unlikely to be declined for a mortgage based on your outgoings, but speaking to a mortgage broker before applying is still recommended as they can improve your chances of getting the best deal. Most mortgage lenders will class your debt-to-income ratio as moderate, which means some of them might view your application with caution. Some lenders are much more strict than others when it comes to affordability and debt, so it’s important for you to find a lender who’s more lenient. You should speak to a mortgage broker before you apply to ensure you’re matched with a lender whose criteria you fit. Most mortgage lenders will class your debt-to-income ratio as high. But that’s where we can help! With so much of your monthly income going towards debt repayments, you could struggle to get approved for a mortgage without the help of a mortgage broker. We can help you find a lender who’s more lenient on debt and affordability, and could still secure a mortgage approval. What is a good debt-to-income ratio?A debt-to-income ratio below 20% is considered best and might help you secure a better rate on your mortgage. You’ll be classed as a low-risk borrower who can manage their debts well. As long as your debt-to-income ratio is below 50%, it won’t usually prevent you from getting a mortgage unless there are other weaknesses in your application. Above 50%, lenders might be concerned about your ability to manage your multiple repayments and will approach your application more cautiously. However, lenders do not just look at your debt-to-income ratio as a number alone, they also consider the context. So, for example, they might consider loans for home improvements more favourably than credit card debt from overspending. If your debt-to-income ratio is high but has reduced over time, they will take this into account. Or, if your debt-to-income ratio is rising for a valid reason, such as a period of illness, they can be quite understanding. The table below gives more information on how lenders will see your DTI.
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Lenders who accept high-DTI applicationsSeveral lenders do not have a maximum debt-to-income ratio, meaning that your application will not automatically be declined on this basis. Instead, they will review applications on their individual merits, based on a wider range of affordability factors. These lenders include Leek United Building Society, Foundation Home Loans, and Metro Bank. How a broker can help if you have a high debt-to-income ratioThough all applicants can benefit from speaking to a broker about their mortgage, those with a debt-to-income ratio of over 50% can specifically benefit in the following ways. Providing individual adviceA broker can explain whether lenders will view your case favourably or unfavourably. On that basis, they can recommend whether you move ahead with your application now or wait until you have reduced your debts. They may have suggestions on how you can clear certain debts quicker or make your application more attractive. Identifying high-DTI lendersA broker will have a full list of lenders who have a high-DTI threshold or who do not calculate your debt-to-income ratio as part of their assessment. Then, they can help you choose your preferred lender from that list and make your application. Negotiating directly with lendersCertain lenders consider high-DTI applications to be complex cases that require direct discussion with their team. Your broker will take the lead on that negotiation to ensure that your case is seen in the best possible light (for example, by explaining the circumstances behind your current debt-to-income ratio and the action you’re taking to reduce it). Aimee Wilson Outstanding debt How we got Aimee's mortgage approvedBuying our first home had been a priority for us for a while, but my partner’s debts and history of bad credit prevented us from getting approved on the high street. Online Mortgage Advisor grabbed my attention after seeing loads of great reviews about how they have helped people in similar circumstances to us. I filled out a form to be matched with an advisor and that’s exactly what happened. They told me I would be able to borrow just in my name but would need more deposit, which gave me my focus for the next 12 months. Once I had saved the extra deposit, I didn’t have to lift a finger and, before I knew it, was offered two mortgage lenders to choose from. We’ve now got our three-bed semi-detached house and couldn’t have done it without the continued support of Online Mortgage Advisor and their network of experts. Read full story Debt-to-income and Help to BuyIf you intend to use a government Help to Buy equity loan to buy a property, you should be aware that you are only eligible for this scheme if your debt-to-income ratio is below 45%. You can find out more about this scheme in our guide to Help to Buy mortgages. The scheme uses a slightly different calculation of debt-to-income than most lenders use. It is based on your debt, rather than gross income (i.e. your income after tax and deductions). It does not include childcare and child maintenance among your debts. Credit card debt can comprise no more than 36% of your total debts. Read more about Help to Buy affordability. Rated excellent by our customersGet matched with a broker experienced in complex debt-to-income casesIf you have a high debt-to-income ratio, i.e. over 50%, it could be a huge benefit to work with a broker who specialises in high-DTI applications. Their advice, expertise, and lender relationships could make all the difference in securing the mortgage you need. We offer a free service that matches you with the right broker for your circumstances. To try it out, and connect with a specialist broker for a free, no-obligation chat, you simply need to call us on 0808 189 2301 or make an enquiry online. FAQsHow much debt is acceptable for a mortgage?There’s no specific figure at which your debt becomes unacceptable for a mortgage, but high monthly debt repayments in relation to your monthly income can impact your application. To find out more, read our guide to getting a mortgage when in debt. Does my debt-to-income ratio include my mortgage?Yes, your mortgage repayments are included in the calculation of your debt-to-income ratio, along with all other debts, such as your student loan, credit card debts, personal loans, car finance, etc. Ask a quick question We know
everyone's circumstances are different, that's why we work with mortgage brokers who are experts in all different mortgage subjects. Related ArticlesAbout the author Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background. Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course! Read more about Pete Pete Mugleston Mortgage Advisor, MD Continue Reading*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it. Maximise your chances of approval, whatever your situation - Find your perfect mortgage broker Don't miss out...Sign up for the latest market news, new lender product information and helpful tips and advice from our experts! How do mortgage lenders calculate DTI?Your debt-to-income ratio (DTI) is all your monthly debt payments divided by your gross monthly income. This number is one way lenders measure your ability to manage the monthly payments to repay the money you plan to borrow.
What is maximum debtAs a general guideline, 43% is the highest DTI ratio a borrower can have and still get qualified for a mortgage. Ideally, lenders prefer a debt-to-income ratio lower than 36%, with no more than 28% of that debt going towards servicing a mortgage or rent payment.
What is considered a good debtWhat do lenders consider a good debt-to-income ratio? A general rule of thumb is to keep your overall debt-to-income ratio at or below 43%.
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How do mortgage companies calculate debt to income ratio
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