Debt-to-Income Ratio: Calculating Yours Before the Bank Does
ADS Team
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August 18, 2026
23 days ago
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In short: Debt-to-income is total debt divided by gross annual household income. From February 2026 APRA limits lending at a DTI of 6 or above to 20% of a lender's new lending, so crossing that line does not disqualify you but does put you in a restricted quota.
Key takeaways
- Total debt includes credit card limits, not balances.
- DTI of 6 is the regulatory threshold; above it you compete for a capped share.
- It is a separate test from serviceability - you must pass both.
- Reducing limits is the fastest way to move the ratio.
The calculation
Total debt ÷ gross household income.
| Income | Total debt | DTI | Above threshold? |
|---|---|---|---|
| $120,000 | $600,000 | 5.0 | No |
| $150,000 | $900,000 | 6.0 | Yes |
| $180,000 | $1,150,000 | 6.4 | Yes |
| $220,000 | $1,200,000 | 5.5 | No |
A $20,000 card limit at zero balance still adds $20,000 to total debt - enough to tip a marginal case over.
Why the cap exists
Serviceability asks whether you can pay today at a buffered rate. DTI asks how exposed you are to a long period of higher rates or an income shock. Highly indebted households cut spending sharply when rates rise, which transmits from housing into the wider economy.
Moving the number
- Cancel or reduce unused credit limits.
- Clear small consumer debts before applying.
- Shop lenders - each manages its own quota, so appetite differs.
- Reconsider the purchase price if the ratio is well above 6.
Frequently asked questions
Is DTI above 6 an automatic decline?
No. Lenders can still write these loans within 20% of new lending. You are competing for a restricted allocation, so a strong application matters more.
Does HECS count in DTI?
Treatment varies. Some lenders include the outstanding balance in total debt, others only the compulsory repayment in serviceability. Ask specifically.
Is DTI or serviceability more important?
You must pass both. Serviceability binds more often for lower-income borrowers; DTI binds more often at high price points relative to income.
Related reading
- APRA's DTI Cap Explained: The 20% Rule That Started February 2026
- Why Borrowing Power Varies $200,000 Between Lenders
- LVR and Equity: Worked Calculations
Sources
- Macroprudential policy settings — APRA
- Prudential Practice Guide APG 223 — APRA
Information current as at 2 September 2026.
General advice warning: This article contains general information only. It does not take into account your objectives, financial situation or needs, and it is not personal credit or financial advice. Consider whether it is appropriate for you and seek advice from a licensed credit representative before acting.
Any interest rate shown is an example only and is not an offer of credit. Where a rate is quoted, the applicable comparison rate is available from the relevant lender and should be considered alongside it.
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