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        How Debt-to-Income Ratios Affect Mortgage Applications

        Your debt to income ratio can affect the type of mortgage you can get. Find out how and why in this comprehensive guide.

        Do you currently have any outstanding debt?

        No impact on your credit score

        When you apply for a mortgage, a lender will want to know your debt-to-income (DTI) ratio before approving your loan. It’s one of several factors they take into consideration when determining whether or not you’ll be able to afford your monthly repayments.

        In this comprehensive guide, we’ve gathered everything you need to know about DTI ratios, including how they’re calculated, what’s considered an acceptable DTI ratio, and how you can still secure a mortgage if your ratio is at the higher end of the spectrum.

        Read on for more information or jump to the section that’s relevant to you via the links below…

        What is a debt-to-income ratio?

        It’s a standard measure used by mortgage lenders to determine whether or not an applicant will be able to afford their monthly repayments. More specifically, it’s the percentage of your pre-tax monthly income that goes towards paying off debt and other fixed financial commitments.

        The lower your DTI ratio, the less risky you’ll appear to a lender so the more options – and typically better deals – you’ll be offered. Having said that, you can still get a mortgage if your DTI ratio is on the high side. You may just have a more limited pool of loans to choose from.

        What’s considered debt?

        Your lender will take into consideration any mortgages, rent payments, student loans, car loans, childcare costs, credit card debt and any other fixed monthly loan payments you have.

        Get Started with a Broker

        Increase your chance of approval with a specialist in mortgages with outstanding debt

        How do you calculate your debt-to-income ratio?

        You can use our calculator to work out your DTI ratio. Simply input your monthly income before tax or any other deductions and your monthly debt payments and we’ll tell you whether lenders will consider your DTI ratio low, medium or high risk.

        calculator icon

        Debt to Income Ratio Calculator

        You can use our debt-to-income (DTI) ratio calculator to work out how much of your income is going towards your fixed outgoings, expressed as a percentage. Based on that percentage, this tool will tell you whether mortgage lenders will class your DTI as low, medium or high.


        The amount you get paid each month, after any taxes or contributions have been deducted
        £
        Be sure to include all of your fixed outgoings, as well as any loans or credit card payments you make
        £

        Your Debt to Income Ratio is %

        Risk Low Moderate High

        Good news! Most mortgage lenders will class your debt-to-income ratio as low. You’re unlikely to be declined for a mortgage based on your outgoings, but speaking to a mortgage broker before applying is still recommended as they can improve your chances of getting the best deal.

        Most mortgage lenders will class your debt-to-income ratio as moderate, which means some of them might view your application with caution. Some lenders are much more strict than others when it comes to affordability and debt, so it’s important for you to find a lender who’s more lenient. You should speak to a mortgage broker before you apply to ensure you’re matched with a lender whose criteria you fit.

        Most mortgage lenders will class your debt-to-income ratio as high. But that’s where we can help! With so much of your monthly income going towards debt repayments, you could struggle to get approved for a mortgage without the help of a mortgage broker. We can help you find a lender who’s more lenient on debt and affordability, and could still secure a mortgage approval.

        Alternatively, you can calculate your DTI ratio yourself. Add together all your monthly debt obligations and divide it by your gross monthly income, then multiply the figure by 100.

        For example, if your monthly debt payments are £1,600 and your gross monthly income is £4,000, your DTI ratio is 40%.

        What’s considered a good debt-to-income ratio?

        Each lender will have its own take on what it considers to be a good DTI ratio, but generally, a lender will want the figure to be less than 30-40% to be acceptable for a mortgage.

        If your ratio is slightly higher, you shouldn’t have too much trouble getting a mortgage. You may just have a smaller pool of mortgage lenders to choose from and, therefore, a more limited number of deals. You may also not be able to borrow as much.

        If your ratio is a lot higher, say around the 70-80% mark, a handful of lenders will still consider lending to you. However, they’ll want to closely scrutinise your finances first.

        If you have a 90% or 100% DTI ratio, securing a mortgage will be hard, but not impossible. Your best bet is a specialist lender who doesn’t heavily rely on DTI ratios when calculating affordability. An experienced broker is best placed to help you if you fall into this category.

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        How to get a mortgage with a high debt-to-income ratio

        As mentioned above, it’s still possible to get a mortgage if you have a high DTI.

        Here are three steps you can take to improve your chances of getting your application approved:

        Talk to a broker

        Whatever your financial situation, it’s always worth seeking advice from a broker before applying for a mortgage as they’ll be able to look at your individual circumstances and suggest the best deal to suit your needs. However, if you have a high level of debt relative to your income, a broker is essential.

        They’ll be able to assess your finances and help you accurately calculate your DTI ratio. You could, for example, have accidentally included an outgoing that’s not regarded as a debt in your initial calculations. They can then suggest which lenders to approach and which to avoid, saving you both time and money on wasted applications.

        An experienced broker will also be able to negotiate on your behalf and may even have access to products and specialist lenders that aren’t available to the general public

        Check your credit reports

        If you have high levels of debt relative to your income, you may well be financially overburdened, which could possibly show up in your credit reports. Lenders review credit reports as part of their eligibility assessment and if your report contains multiple black marks showing you’re struggling with debt, this would be a red flag.

        That’s why it’s worth checking your credit reports before making any applications, correcting any errors and taking steps to improve them, if necessary.

        Try clearing some of your debt

        Lenders will look at you more favourably the lower your DTI ratio, so if you can reduce some of your monthly debt payments, it could work in your favour.

        Maybe you could consolidate your debts into one more manageable monthly repayment – for example, a credit card balance transfer. Or perhaps you could even pay off some of your debt before applying for your mortgage.

        Alternatively, you could try to increase your monthly earnings. Firstly, make sure you’re accounting for all your income, including any benefits, maintenance payments and commission. Then you could consider overtime, additional freelance work or even applying for a promotion.

        To get your application started with the right mortgage broker, make an enquiry and we’ll match you with an advisor based on your needs, circumstances and debt-to-income ratio.

        Which lenders offer mortgages to high DTI borrowers?

        Plenty of lenders will consider your application if you’re a high debt-to-income borrower. This includes big names such as Virgin Money, Nationwide, Natwest and Skipton Building Society. However, there’s no guarantee they’ll lend to you. They’ll consider each applicant on a case-by-case basis and may refer some applications for more in depth underwriting before making a final decision.

        Some specialist lenders don’t use debt to income ratios at all, which may better suit borrowers with high levels of debt. These include Precise Mortgages, The Mortgage Lender and Together. A broker will be able to advise you on the right lender for your circumstances.

        Which lenders have you already tried?

        40% of our customers had been declined elsewhere before coming to us. The brokers we work with will be able to assess your circumstances and then identify the right lender for you instead of going direct.

        — Choose from the tiles below to continue:

        Get matched with a broker who specialises in high DTI mortgages

        Getting a mortgage with high levels of debt relative to your income can be difficult but is far from impossible. You just need to know which lenders to approach and how to frame your application. This is where an experienced broker comes in. A broker who specialises in securing loans for borrowers with high DTI ratios can offer invaluable help and advice.

        Our broker matching service can connect you with an expert who will be able to review your situation and advise you on how to secure the right home loan for your situation.

        Give us a call on 0808 189 0463 or make an enquiry and get matched with an expert today for a free initial conversation.

        Get Started with a Broker

        Increase your chance of approval with a specialist in mortgages with outstanding debt

        FAQs

        To apply for a Help to Buy mortgage, your DTI ratio cannot be more than 45%.

        Yes, in theory. Lenders will typically consider your buy-to-let mortgage application on a case-by-case basis and thoroughly scrutinise your finances to make sure you’ll be able to cover your monthly repayments.

        Ask a quick question

        We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in all different mortgage subjects. Ask us a question and we'll get the best expert to help.

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        Pete Mugleston

        Pete Mugleston

        Mortgage Expert, MD

        About the author

        Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

        Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

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        FCA Disclaimer

        *Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us as well as any of our own are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

        Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.