1. What is Debt To Income Ratio?

The Debt To Income (DTI) ratio is a personal finance measure that compares an individual's monthly debt payments to their gross monthly income. In the UK, lenders use this ratio to assess a borrower's ability to manage monthly payments and repay debts.

2. How Does the Calculator Work?

The calculator uses the DTI formula:

Where:

• Total Monthly Debt Payments — Sum of all monthly debt obligations (mortgage/rent, loans, credit cards, etc.)
• Gross Monthly Income — Total income before taxes and deductions

Explanation: The ratio shows what percentage of your income goes toward debt payments each month.

3. Importance of DTI Calculation

Details: A lower DTI ratio indicates better financial health. UK lenders typically prefer ratios below 36%, with no more than 28% of that debt going toward mortgage payments.

4. Using the Calculator

Tips: Include all monthly debt obligations (mortgage/rent, car loans, student loans, credit card minimums, etc.) and your total pre-tax income. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a good DTI ratio in the UK?
A: Generally, below 36% is good, 36-42% may limit borrowing options, and above 43% is considered high risk by most UK lenders.

Q2: Does rent count in DTI ratio?
A: Yes, for non-homeowners, rent payments are included in the debt portion of the ratio.

Q3: How can I improve my DTI ratio?
A: Either increase your income or reduce your monthly debt payments by paying down balances or consolidating debts.

Q4: Do utilities count toward DTI?
A: No, only contractual debt obligations are included (loans, credit cards, mortgages, etc.).

Q5: How often should I check my DTI ratio?
A: It's good practice to calculate your DTI whenever your financial situation changes significantly or before applying for new credit.