What Is Debt-to-Income Ratio for a Home Loan?

What Is a Debt-to-Income Ratio?

Debt-to-income ratio is a simple measure of leverage. It compares the relevant credit limits of your debts, including the new home loan, with your gross annual income (your income before tax).

The DTI formula

DTI = credit limit of relevant debts ÷ gross annual income

For APRA’s reporting purposes, the relevant debt measure can include the credit limit of mortgages, personal loans, credit cards, consumer finance, margin lending, BNPL and other known debts. HELP debt is excluded from APRA’s DTI reporting definition.

A simple example

Say you earn $120,000 a year before tax and you are seeking a $600,000 home loan with no other debts. Treating the loan amount as the relevant limit, your DTI is $600,000 ÷ $120,000 = 5.0. If you also had a $20,000 car loan, the relevant debt limits would total $620,000 and your DTI would be about 5.2.

Because DTI uses gross income, it does not consider your living expenses or the interest rate. Two borrowers with the same DTI can have very different repayment pressure. That is why DTI is only one part of a lender’s assessment.

What counts as debt

For APRA’s reporting purposes, the relevant debt measure can include the credit limit of the following, and lenders may take a similar view in their own assessments. Exact treatment depends on the lender and on how APRA’s reporting rules define DTI for ADIs.

The new home loan you are applying for:

Existing home loans and investment loans

Personal loans and car loans

Credit cards, at the card limit rather than the current balance

Other consumer finance, margin lending and buy now, pay later (BNPL) facilities

Other known debts disclosed in your application

HELP debt is excluded from APRA’s DTI reporting definition. Because the measure is based on credit limits, a credit card with a zero balance can still add to your DTI. Some borrowers review their card limits before applying. How each lender treats limits and other debts in its own assessment can differ.

What usually counts as income

DTI is based on gross income. Lenders generally start with base salary or business income shown in payslips, tax returns and other documents. Other income, such as overtime, bonuses, commissions or rental income, may be accepted in full, at a reduced percentage, or not at all, depending on the lender’s policy and your history of receiving it.

Why Do Lenders and APRA Care About DTI?

Lenders look at DTI because a high multiple leaves less room if interest rates rise or income falls. APRA looks at it for a wider reason: high household indebtedness is one of the vulnerabilities it monitors in the financial system.

APRA has said that, in past periods of easier financial conditions, riskier lending including high DTI lending tended to pick up. It announced its DTI limit in November 2025 as a pre-emptive step to contain a potential build-up of housing-related risks, with the support of the Council of Financial Regulators.

What Is the APRA DTI Limit?

APRA’s DTI limit is a rule for lenders, not for individual borrowers. Based on APRA’s announcement of 27 November 2025:

It took effect on 1 February 2026.

It applies to ADIs (banks, building societies and credit unions) that do residential mortgage lending in Australia.

ADIs can lend up to 20% of new loans at a DTI of six or more.

The 20% limit applies separately to new owner-occupier lending and new investor lending.

It sits alongside other macroprudential settings. At the time of the announcement, the mortgage serviceability buffer remained at three percentage points.

Within the limit, ADIs keep discretion to lend to creditworthy high-DTI borrowers in line with their own risk appetite and credit policies. In other words, the rule does not ban loans at six times income or above. It caps how many of them an ADI can write.

What counts as a “high” DTI?

A DTI of six or more is “high” under APRA’s limit. The table below shows what that means in relevant debt limits at different gross incomes. These are simple multiples for illustration only.

Remember that the relevant debt limits include existing facilities, not only the new loan. A borrower with a $450,000 investment loan already in place uses up part of their DTI before a second property is considered.

Which loans are exempt?

APRA’s DTI limit excludes finance for the purchase of newly erected dwellings, finance for the construction of new dwellings, and owner-occupier bridging finance. Bridging finance covers the period when a borrower is moving between homes and holds two owner-occupier loans, which APRA expects to be temporary. Being exempt from APRA’s limit does not mean a lender will skip its usual credit assessment.

Does the limit apply to non-bank lenders?

APRA’s limit applies to ADIs. Non-bank lenders are not governed by APRA’s ADI prudential standards in the same way, and they set their own credit policies. That does not make them easier or cheaper. Their criteria, pricing and product features vary, so each option needs to be compared on its own terms.

Who is most likely to be affected?

When it announced the limit, APRA said a 20% cap was unlikely to restrict lending to owner-occupiers or first home buyers in the near term because they typically borrow at lower DTIs, and that the limit would have more impact on investors. Conditions and lender capacity can change, so this should be read as APRA’s assessment at that time, not a guarantee about any future application.

DTI vs Serviceability vs LVR: What’s the Difference?

Borrowers often mix these up. They are three separate tests, and a lender can apply all of them to the same application.

Gross annual income	Relevant debt limits at DTI of 6	Relevant debt limits at DTI of 4
$90,000	$540,000	$360,000
$120,000	$720,000	$480,000
$150,000	$900,000	$600,000
$200,000	$1,200,000	$800,000

You can have a moderate DTI and still fail serviceability if your expenses are high. You can also pass serviceability with a DTI above six. That is where lender policy and available capacity matter.

Practical Australian Examples

These scenarios are simplified and hypothetical. They do not predict what any lender will approve.

Example 1: A couple buying a first home

A couple has a combined gross income of $190,000. They are seeking a $650,000 loan and have two credit cards with total limits of $8,000. Counting the card limits in full, the relevant debt limits total $658,000 and DTI is about 3.5. That is well below six, so the APRA DTI limit would not be the main issue. Serviceability, deposit and living expenses would matter more.

Example 2: An investor adding a third property

An investor earns $180,000 and already owes $700,000 on their home and $450,000 on an existing investment property. They are considering a further $500,000 investment loan. For this simplified illustration, treating those debt amounts as the relevant credit limits, total relevant debt would be $1,650,000 and the DTI would be about 9.2. This is a high DTI, and an ADI near its investor high-DTI capacity may decline it or ask for changes. How rental income is treated in the calculation can differ, so treat the figure as indicative only.

Example 3: An upgrader close to the line

A single borrower earns $140,000 and is seeking a $780,000 loan while carrying a $25,000 car loan. Treating the amounts as relevant credit limits, total relevant debt is $805,000 and DTI is about 5.75. That is just under six. A small change, such as a larger loan amount or an extra debt, could push the ratio over the line and change how a lender treats the application.

Can You Get a Home Loan With a High DTI?

It can be possible, but it is not something anyone can promise. Approval for a high-DTI loan generally depends on:

Whether the lender is an ADI subject to APRA’s limit, and how much of its high-DTI capacity it has left

The lender’s own credit policy, which may apply extra scrutiny or its own DTI limits

Your income stability, savings, credit history and expenses

The size of your deposit and the loan-to-value ratio

Whether the loan falls into an exempt category, such as the purchase or construction of a new dwelling

Lender policies differ and change over time, so two lenders can give different answers to the same application. A broker can explain how lenders in their network generally approach high-DTI applications, but no outcome is guaranteed.

What Can Influence Your DTI?

The ratio has two parts, debt and income, so anything that changes either one changes the result. This is general information, not personal advice. Common factors include:

Debt limits: the loan amount you seek, and the limits of any existing facilities that will remain in place.

Credit card and other limits: unused limits can still count towards the measure.

Documented income: income that is genuine but poorly documented may not be counted in the assessment.

Number of applicants: adding a co-borrower adds both income and debts.

Loan purpose: owner-occupier and investor loans are measured separately under APRA’s limit.

Costs, Risks and Limitations

DTI does not measure affordability. A low DTI does not mean repayments will be comfortable, and a high DTI does not always mean they won’t be.

Interest rate risk. The higher your debt compared with your income, the more a rate rise can affect your repayments.

Lender capacity can shift. An ADI’s ability to write high-DTI loans is measured across its portfolio, so timing and lender choice can matter.

Settings can change. APRA has said it will keep monitoring and may adjust settings, so check current rules before relying on any figure.

Costs still apply. Loan fees, stamp duty, lenders mortgage insurance and other costs sit outside DTI but affect what you need to borrow.

Frequently Asked Questions

What is a debt‑to‑income ratio (DTI)?

DTI compares the credit limits of your debts (including the new home loan) with your gross annual income, serving as a measure of leverage.

Why do lenders and APRA care about DTI?

A high DTI leaves less room if interest rates rise or income falls. APRA monitors high household indebtedness as a systemic risk.

Can you get a home loan with a high DTI?

It’s possible, but approval depends on lender policy, APRA’s limits, your income stability, deposit size, and whether the loan falls into an exempt category.

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Measure	What it looks at	Why it matters
DTI	Credit limits of relevant debts compared with gross annual income	A leverage indicator. APRA limits how much high-DTI lending ADIs can write.
Serviceability	Income, expenses and debts, tested at an interest rate above the actual rate	Helps determine whether repayments look affordable and how much a lender may lend.
LVR (loan-to-value ratio)	Loan amount as a percentage of the property’s value	Relates to your deposit and may affect pricing and whether lenders mortgage insurance applies.