DTI or TDTI (Debt-To-Income ratio)
DTI or TDTI stands for 'Total Debt To Income' and is a ratio used to measure the servicability or affordability for a borrower(s) to have a home loan based on borrowing compared to total gross income.
The Reserve Bank is expected to finalise legislation around maximum DTI levels by the end of 2023. Some lenders are already testing and putting in place different levels in anticipation of this change. So it is not uncommon for a home loan request to be assessed to be no more than 6 or 7 times gross income.
The calculation is: Total Debt/Total income = TDTI
A scenario on how TDTI is calculated:
Debt: $600,000 proposed homeloan $10,000 existing credit card limit. Total of $610,000.
(The total debts are based on the higher of the balance or limits available)
Income: 1st Applicant $52,000 p.a. 2nd Applicant 80,000 p.a. Total income of $132,000 p.a.
Calculation: Total Debt/Total income = TDTI
Example: $610,000 Divided by $132,000 = 4.62 TDTI