Debt-to-income ratio, or DTI, is a simple leverage measure: total debt divided by gross annual income. A household earning $200,000 with $1.2 million of total debt has a DTI of 6. The ratio does not tell you whether the monthly repayments are affordable, but it tells lenders and regulators how leveraged the borrower is.
- DTI = total debt divided by gross income
- A DTI of 6 means debt equals six times annual income
- High DTI is not automatically a decline
- Serviceability is a separate affordability test
- Portfolio investors are more likely to encounter DTI constraints
Why DTI now matters more
As at August 2026, APRA’s macroprudential settings require authorised deposit-taking institutions to limit the proportion of new owner-occupied and investor lending at DTI of six or more. The limit operates at the portfolio level rather than as a blanket ban on every individual high-DTI loan.
That means a DTI above six is not automatically a decline, but it can affect lender appetite and credit decisions.
DTI and serviceability are different tests
A borrower can have a high DTI but still demonstrate strong monthly surplus income, or a lower DTI but weak serviceability because of high committed expenses. Lenders look at both.
The APRA serviceability buffer also remains a separate requirement for regulated banks, designed to test repayment capacity at a higher assessment rate.
How investors should think about it
Portfolio investors can reach high DTI ratios quickly because all housing debt is counted against income. Rental income helps income but does not eliminate the leverage created by the debt itself.
This is another reason to plan loan structure and lender selection before making the next purchase rather than after signing a contract.
Frequently asked questions
Does a DTI over six mean my loan will be declined?
No. Current APRA limits operate at a lender portfolio level, although individual lender appetite may become more conservative.
Does rental income count in DTI?
Lenders use defined income rules; the exact calculation can vary. The key point is that all relevant debt is also captured.
Can I reduce DTI without paying off debt?
Increasing sustainable recognised income can reduce the ratio, but debt reduction is the most direct way to lower DTI.