Finance Calculator
Debt-to-Income Calculator
Assess your borrowing position by calculating your debt-to-income ratio. Enter your annual income and debt payments to see how lenders may view your financial commitments and capacity for additional borrowing.
Enter your income and debt details
What is Debt-to-Income Ratio?
The debt-to-income ratio (DTI) compares total monthly debt obligations to gross monthly income. Lenders use it to assess whether a borrower can comfortably take on additional repayments.
How is the debt-to-income ratio calculated?
The debt-to-income (DTI) ratio is one of the most widely used affordability measures in lending. It expresses the proportion of your gross income that is committed to debt repayments, giving lenders a clear view of your financial headroom.
A lower DTI indicates more disposable income and greater capacity to service additional debt. Conversely, a high DTI may signal over-commitment and increase the likelihood of application decline or higher pricing.
The assessment thresholds used in this calculator are:
- Below 30% - Good: Healthy balance between income and debt. Strong borrowing position.
- 30% to 40% - Acceptable: Manageable debt levels, though some lenders may begin to apply caution.
- 40% to 50% - High: Limited disposable income. May restrict borrowing options or result in higher rates.
- Above 50% - Very High: Significant financial stretch. Most mainstream lenders would decline at this level.
The formula used in this calculator is:
Current DTI = Total Annual Debt Payments / Annual Gross Income × 100
Proposed DTI = (Total Annual Debt + Proposed New Debt) / Annual Gross Income × 100
Assumptions and caveats
- •DTI is calculated using gross (pre-tax) income. Some lenders may use net income, which would produce a higher DTI ratio.
- •Include all regular debt commitments: mortgage/rent, loans, credit cards (minimum payments), hire purchase, and any other recurring obligations.
- •Assessment thresholds are general guidelines. Individual lenders apply their own criteria and may weight different factors.
- •DTI is only one element of a lending decision. Credit history, security, and business performance are also considered.
- •Results are indicative only. Contact a finance specialist for a detailed affordability assessment.
Worked Example
Scenario
A business owner has a gross annual income of GBP 95,000 and total monthly debt commitments of GBP 2,800 (including mortgage, business loan, and car finance).
Calculation
- Monthly Income = 95,000 / 12 = GBP 7,917
- Debt-to-Income Ratio = (2,800 / 7,917) x 100
- DTI = 35.4%
What This Means
A DTI of 35.4% is within the acceptable range for most UK lenders, who typically look for a ratio below 40-45%. This means the borrower is using approximately one-third of their gross income to service debt. Adding further borrowing would push the ratio higher, so lenders would assess whether additional repayments remain affordable within the remaining income.
Frequently asked questions
A debt-to-income (DTI) ratio is a personal finance measure that compares your total annual debt payments to your gross annual income. It is expressed as a percentage and is used by lenders to assess your ability to manage monthly payments and repay debts.
Generally, a DTI below 30% is considered good and indicates a healthy balance between debt and income. A ratio between 30% and 40% is acceptable but may limit borrowing options. Above 40% is considered high and may make securing new finance more difficult.
Lenders use DTI as one of several affordability metrics when assessing applications. A lower DTI suggests you have sufficient income headroom to take on additional debt, while a higher DTI may signal over-commitment and increased risk of default.
DTI should include all regular debt commitments - mortgage or rent payments, loan repayments, credit card minimum payments, hire purchase agreements, and any other recurring debt obligations. It typically excludes day-to-day living expenses.
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