Debt-to-Income Ratios: What They Are and Why They Matter
Christian Stevens, Mortgage Broker
Published December 6, 2025, 1:19 P.M
Debt-to-Income Ratios Understand how DTI affects your borrowing power. Learn how lenders assess Debt-to-Income ratios and how Flint helps optimize your home loan approval.
Key Facts
- Debt-to-Income (DTI) ratio compares your total debts to your gross annual income and is one of the most influential metrics lenders use in Australia.
- Banks and lenders use DTI to understand whether your existing debt load aligns with your income and borrowing capacity.
- A lower DTI signals lower risk — improving your chances of home loan approval and stronger borrowing power.
- Many Australian lenders prefer DTIs under 6, though some accept higher DTIs for strong applicants, professionals, or low-LVR loans.
- Flint Group helps borrowers structure applications strategically around DTI policy to maximise approval outcomes and borrowing limits.
What Is a Debt-to-Income Ratio?
Your DTI ratio is a straightforward calculation used heavily in Australian mortgage lending:
DTI = Total Debt ÷ Gross Annual Income
Unlike simple affordability checks, DTI captures all forms of debt risk, including:
- Home loans (existing or proposed)
- Car loans and personal loans
- Credit card limits (not balances — limits)
- HECS/HELP
- Buy Now Pay Later (BNPL)
- Overdrafts and store finance
Example:
- Total debt: $500,000
- Gross annual income: $100,000
- DTI = 5.0
This is considered acceptable for most mainstream lenders.
Why Do Lenders Use DTI?
Australian lenders use DTI as a core risk indicator. Even when your repayment history looks solid, a high DTI can signal that your finances might be stretched.
A higher DTI suggests:
- Reduced buffer for rising interest rates
- Increased vulnerability to income changes or job loss
- Less margin for life expenses or emergencies
This metric becomes even more important during periods of rate volatility, which is why DTI checks are now stricter than before.
What Is Considered a 'Good' DTI?
DTI Ratio | Meaning |
Under 4 | Low risk – strong approval prospects |
4 to 6 | Acceptable – commonly approved with good credit & stable income |
Over 6 | Higher risk – some lenders cap or decline |
Many lenders apply strict DTI caps — particularly above 6 or 7 but Flint works with a broad panel including lenders who allow higher DTIs when:
- You have strong, stable income
- You work in a professional or high-income occupation
- Your borrowing is below 80% LVR
- Your financial conduct and savings patterns are strong
How to Reduce Your DTI
Strategically lowering DTI before applying for a loan can unlock more borrowing power and increase approval chances.
Smart ways to reduce DTI include:
Paying down personal loans and credit cards
Reducing credit card limits (all limits count as debt)
Avoiding new BNPL, store finance, or unnecessary new credit
Consolidating small debts when it reduces total monthly repayments
Even minor adjustments can shift your DTI into a lender’s approval range — especially when you’re on the borderline.
DTI and Loan Amount
Australian lenders may restrict the loan size you qualify for if your DTI exceeds their internal policy threshold — even if your day-to-day budget could comfortably support the repayments.
This is why some borrowers with strong incomes still:
Receive lower borrowing limits
Face unexpected declines
Qualify for fewer lender options
Understanding lender-by-lender DTI policy is one of the biggest advantages of working with an experienced broker like Flint.
📞 Want Help Managing Your DTI Before You Apply?
At Flint, we help borrowers:
- Calculate and optimize your DTI based on real lender policy
- Identify lenders who assess DTI more flexibly
- Structure your application to maximize borrowing power and approval likelihood
Talk to Flint today and make sure your income is working as hard as possible for your home loan goals — with Australia’s leading mortgage experts guiding your next step.
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