DTI - Debt to income ratio

Discussion in 'Loans & Mortgage Brokers' started by sumterrence, 3rd Dec, 2019 at 12:03 AM.

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  1. sumterrence

    sumterrence Well-Known Member

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    Hi all brokers and bankers,

    I'm in a situation where my serviceability on paper passes for my new loan, however my DTI will be close to 9.

    Does anyone of you know which lender are more easy on DTI or have a higher threshold? Or are you able to share any experience of high DTI and what sort of mitigan did you use?

    Thanks!
     
  2. Lindsay_W

    Lindsay_W Well-Known Member

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    Yeah there are quite a few lenders that are ok with DTI's up to 9
    Are you using a broker? If not, why not?
     
  3. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    A taxpayer can have a high DTI but have means to limit personal income through business activities, trusts etc.

    Eg Darth may have a trust which distributes to his spouse, The Emperor Darth Sidious and his children Luke and Leia as well as a Death Star No3 Pty Ltd. Total trust income is $200,000 but Darth just receives his Empire salary of $120,000pa
     
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  4. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    There's a lot more to borrowing capacity than a simple DTI calculation. A DTI of 9 is quite high and would result in a rejection, but consider:
    * Not all lenders calculate DTI the same way.
    * Not all lenders even bother using a DTI.

    Find a good broker (plenty of us on this forum), get a proper analysis done specific to your circumstances.
     
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  5. mikey7

    mikey7 Well-Known Member

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    What's 'income' based on? Before or after tax?
     
  6. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Yes. No. Sometimes.
     
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  7. Redom

    Redom Finance Strategist Business Member

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    Net usually.

    Aussie banks use a simple net surplus model to determine borrowing power. This is pretty simple:
    Net Income - Assessed Expenses = Net Surplus.

    The assessment rate they use shapes how much the net surplus can be extrapolated. E.g. a $1k monthly surplus gets extrapolated into a higher borrowing power when the assessment rate is 5.5% vs 7.25%.

    Nowadays, some banks do an overlay DTI calculation on top. This is a different method of calculating serviceability, commonly used in asian countries when determining mortgage serviceability. It is more macro based, simpler method - but not as accurate.
     
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  8. marty998

    marty998 Well-Known Member

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    Be interesting to see what happens if Darth, the Emperor, Luke, Leia and Death Star No3 Pty Ltd each try and claim their income from Skywalker Trust is $200,000 when they individually go to Mr Yoda the friendly Bank Manager for a loan.
     
    Marty McDonald likes this.