DTI stands for Debt-to-Income ratio. It’s a measure comparing your total monthly debt repayments to your gross monthly income, used by lenders to determine how affordable your mortgage or other borrowing is likely to be.
It’s an important financial measure that lenders use to assess your ability to manage monthly repayments and take on new borrowing responsibly.
Why DTI Matters When Applying for a Mortgage
Your Debt-to-Income ratio (DTI) plays a major role in whether you’ll be approved for a mortgage and how much you can borrow. It gives lenders a clear picture of your current financial commitments in relation to your income, helping them decide how much risk they’re taking if they lend to you.
A lower DTI generally shows that you have a healthy balance between income and existing debt, while a higher DTI may suggest that your finances are stretched, making it riskier for a lender to approve a large loan.
In short, DTI helps lenders answer one key question: Can this borrower comfortably afford to take on additional debt without financial strain?
How to Calculate Your DTI Ratio
Calculating your DTI is straightforward. The formula is:
DTI = (Total monthly debt repayments ÷ Gross monthly income) × 100
Here’s how it works:
- Add up all your monthly debt repayments
This includes:- Existing mortgage or rent payments
- Personal loans
- Credit card minimum payments
- Car finance or hire purchase agreements
- Student loans or other regular credit commitments
- Work out your gross monthly income
Use your income before tax and National Insurance deductions. If you have additional income from bonuses, overtime, or rental properties, these can sometimes be included if they’re consistent. - Divide your total monthly debt repayments by your gross monthly income and multiply by 100 to get your DTI percentage.
Example:
If you pay £1,200 each month on debts and earn £4,000 gross income, your DTI would be:
(£1,200 ÷ £4,000) × 100 = 30%
This means 30% of your gross monthly income goes towards paying off debt.
What Is a Good DTI Ratio in the UK?
There isn’t a single number that fits all lenders, but in general:
- Below 35% – Considered good. You’re likely to be viewed as a low-risk borrower.
- 35–45% – Acceptable for many lenders, though they may assess your application more closely.
- Above 45% – May be seen as too high. You might struggle to get approved or may be offered a smaller loan or higher interest rate.
It’s worth noting that different mortgage types (such as buy-to-let or self-employed mortgages) can have slightly different DTI expectations.
How Lenders Use DTI in Mortgage Decisions
Your DTI isn’t the only factor lenders consider, but it’s a key one. It’s part of a wider mortgage affordability assessment, which also looks at:
- Your credit history and score
- Employment stability and income type
- Household expenses and dependants
- The size of your deposit
- The property type and loan-to-value (LTV) ratio
A strong DTI can improve your chances of approval, while a higher one might limit your borrowing capacity. Lenders want to ensure you can comfortably afford repayments even if interest rates rise.
How to Improve Your DTI Ratio
If your DTI is on the higher side, there are practical steps you can take to improve it before applying for a mortgage:
- Pay down existing debts
Focus on reducing high-interest credit card balances or personal loans first. - Avoid taking on new credit
Applying for additional loans or finance before your mortgage application can increase your DTI and signal risk. - Increase your income
If possible, consider ways to boost your earnings through overtime, a second income stream, or a pay rise. - Review your expenses
Creating a clear household budget helps you identify areas where you can save and put more towards debt repayment.
Even a small reduction in your DTI can make a big difference to how lenders view your application.
Common Misunderstandings About DTI
- It’s not the same as your credit score – While both relate to your financial health, your DTI focuses purely on income versus debt, not your history of repayments.
- It doesn’t include every expense – Regular bills such as utilities or groceries don’t count, though lenders do still consider them separately in affordability checks.
- You can still get a mortgage with a higher DTI – Especially if you have a strong credit record, steady income, or a larger deposit.
Why Speak to a Mortgage Adviser About Your DTI
Understanding your DTI is helpful, but interpreting how it fits into your overall mortgage application can be complex. Every lender has different affordability models and thresholds, and a qualified mortgage adviser can help you find the best lender for your circumstances.
They can also guide you on ways to strengthen your application, such as paying off specific debts or structuring your income more efficiently.
Working with a mortgage adviser can save you time, reduce stress, and improve your chances of securing a competitive mortgage deal that suits your budget.
Final Thoughts
Your Debt-to-Income ratio (DTI) is a simple yet powerful indicator of your financial health and borrowing capacity. It tells lenders how much of your income goes towards debt each month and helps them judge whether you can afford your mortgage.
Keeping your DTI as low as possible is one of the best ways to improve your mortgage prospects. If you’re unsure where you stand, speaking to a qualified mortgage adviser can help you understand your current position and prepare for a successful application.
