1. What is a Debt To Income Ratio (DTI) Calculator?

Definition: This calculator determines your debt-to-income ratio, which compares your monthly debt payments to your monthly gross income.

Purpose: It helps individuals and lenders assess financial health and borrowing capacity, particularly important for loan applications in Australia.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• \( DTI \) — Debt-to-income ratio (percentage)
• \( Debt \) — Total monthly debt payments (AUD)
• \( Income \) — Total monthly gross income (AUD)

Explanation: The ratio shows what portion of your income goes toward debt repayment each month.

3. Importance of DTI Calculation

Details: Australian lenders typically prefer DTI ratios below 35-40%. Higher ratios may affect loan approvals and interest rates.

4. Using the Calculator

Tips: Enter your total monthly debt obligations (including loans, credit cards, etc.) and your total monthly gross income (before taxes).

5. Frequently Asked Questions (FAQ)

Q1: What's a good DTI ratio in Australia?
A: Generally, below 35% is excellent, 36-45% is acceptable, and above 45% may limit borrowing options.

Q2: What debts should I include?
A: Include all recurring monthly debts: mortgage/rent, car loans, personal loans, credit cards, and other regular payments.

Q3: Should I use gross or net income?
A: Australian lenders typically use gross income (before tax) for DTI calculations.

Q4: How can I improve my DTI ratio?
A: Either increase your income or reduce your debt obligations through repayment or consolidation.

Q5: Do Australian lenders have maximum DTI limits?
A: Many lenders cap at 45-50%, but some may go higher with strong applications and larger deposits.