What is debt-to-income ratio (DTI)?

The formula

DTI = total debt ÷ gross annual income. "Total debt" means the credit limit of all your debts, not just the balance outstanding, credit cards are counted at their full limit, not what you've actually drawn.

$880,000 ÷ $120,000 = 7.3, which exceeds APRA's 6x "high DTI" threshold. That doesn't mean automatic rejection, it means the application sits in a category lenders manage carefully within their overall portfolio limits.

Why lenders use it

Responsible lending obligations require lenders to assess whether you can service a loan without substantial hardship. DTI gives a quick read on your total indebtedness, and a borrower with a high DTI has less of a financial buffer if income drops, rates rise, or an unexpected expense hits.

APRA's DTI policy took effect from 1 February 2026. Under it, each authorised deposit-taking institution (ADI) can write up to 20% of new owner-occupier loans at a DTI of 6x or above, and separately, up to 20% of new investor loans at a DTI of 6x or above. These two caps apply independently of each other, an ADI's owner-occupier and investor books are counted separately. This is a portfolio-level cap, not a ban on individual borrowers, lenders retain discretion to approve high-DTI loans within that 20% allocation. The 6x figure is APRA's defined threshold for "high DTI" lending, not a hard legal ceiling on any one borrower, and how strictly it's applied varies by lender. DTI also doesn't replace the serviceability test, lenders must separately stress-test your repayments at your loan rate plus a 3 percentage point buffer, both checks apply at the same time. Our Borrowing Power Calculator models both.

DTI vs LVR: different questions entirely

These two measure completely different things, and confusing them is a common mistake. DTI measures debt relative to income, it answers "can you service this level of debt?" LVR (loan-to-value ratio) measures the loan relative to the property's value, it answers "is the security adequate if you default?" A low LVR doesn't offset a high DTI, a property worth $1.2 million with a $600,000 loan is a comfortable 50% LVR, but if your total debts sit at 9 times your income, it still gets flagged on DTI. Lenders assess both together as part of a full credit assessment, alongside your equity position if you're borrowing against an existing property.

What counts as debt

Under APRA's reporting standard, debt means the credit limit of everything a lender knows about, including:

• Existing mortgages, outstanding balance, or the full credit limit for revolving facilities
• Car loans and personal loans
• Credit card limits, typically counted at the full limit, not the balance drawn
• HECS-HELP debt, included in APRA's definition and it reduces borrowing capacity
• Buy Now Pay Later (BNPL) commitments, where disclosed
• The new loan being applied for
• Any other debt known to the lender

Lenders can only count debts they actually know about, but undisclosed debts tend to surface in credit checks anyway, hiding debt rarely ends well.

Three misconceptions worth clearing up

• A DTI above 6 isn't automatic rejection. APRA's 20% portfolio cap means lenders can still approve high-DTI loans within their quota, approval depends on the full picture, income stability, savings, loan purpose and where the lender currently sits against its own cap.
• It's not just your mortgage that counts. Credit card limits, car loans, HECS-HELP and the new loan being applied for all factor in, often at their full face value rather than the balance you've actually drawn.
• DTI and LVR aren't the same thing. They measure entirely different risks, income against debt load, and loan against property value, a good LVR doesn't help if your DTI is high.