What is DTI (Debt-to-Income)?
Debt-to-Income (DTI) is a measure that compares your total debt to your gross annual income. It's one of the key metrics New Zealand banks use to assess your borrowing capacity.
How New Zealand DTI restrictions work
Reserve Bank settings restrict the share of new owner-occupier lending a bank can make above a DTI of 6. They do not create a universal personal entitlement or hard cap. A bank may approve less after applying its own living-expense, servicing-rate, deposit and credit policies.
For an illustrative 6× planning screen:
- $80,000 gross income × 6 = $480,000 total debt
- $120,000 gross income × 6 = $720,000 total debt
- $150,000 gross income × 6 = $900,000 total debt
- Proposed and existing mortgage balances
- Car and personal-loan balances
- Lender-assessed revolving-credit and credit-card exposure
- Other debt included under the lender's current DTI policy
- Combined gross income: $120,000/year
- Proposed mortgage: $600,000
- Car-loan balance: $12,000
- Credit-card limit: $5,000
- Ensures borrowers can afford repayments
- Reduces risk of mortgage defaults
- Complies with RBNZ regulations
- Prevents over-borrowing
- Ensures financial sustainability
- Protects against interest rate rises
- Ask for a raise
- Take on additional work
- Include partner's income
- Rental income from boarders
- Pay off credit cards
- Clear personal loans
- Reduce car loan balance
- Consolidate high-interest debt
- Save a larger deposit
- Consider lower-priced areas
- Look at apartments vs houses
- Consider shared ownership
- Low-deposit eligibility and maximum LVR settings vary by lender and pathway
- Deposits below 20% can involve low-equity margins, fees or additional criteria
- Compare lender-specific pricing rather than assuming a universal rate benefit
- Higher scores = better rates
- Check your credit report annually
- Dispute any errors promptly
- Permanent employment preferred
- 2+ years in current role ideal
- Self-employed needs 2+ years history
- Income: $75,000/year
- Existing debt: $5,000 credit card
- Illustrative 6× total-debt screen: $450,000
- Less existing debt: $445,000 illustrative new-mortgage ceiling
- With a $50,000 deposit: $495,000 illustrative purchase ceiling before lender policy and costs
- Apartment in Auckland CBD
- Townhouse in outer suburbs
- House in regional NZ
- Combined income: $160,000/year
- Existing debt: $15,000 car loan
- Illustrative 6× total-debt screen: $960,000
- Less existing debt: $945,000 illustrative new-mortgage ceiling
- With a $100,000 deposit: $1,045,000 illustrative purchase ceiling before lender policy and costs
- Family home in Wellington suburbs
- A property type and location that preserve a repayment buffer
- Investment property potential
- Look at lower-priced properties
- Consider different locations
- Save a larger deposit
- Wait for a pay rise
- Include partner's income
- Start a side business
- Pay off credit cards
- Clear personal loans
- Wait until car loan is paid
- Housing market conditions
- Economic stability
- Interest rate movements
- International trends
- Test an illustrative borrowing scenario
- See how different incomes affect DTI
- Plan your deposit strategy
- Compare suburbs
How DTI is Calculated
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Formula:
``` DTI = Total debt / Gross annual income ```#
What Counts as Debt?
DTI uses debt stock, not monthly repayments. Serviceability is a separate cashflow assessment.
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Example Calculation:
Illustrative household:
Illustrative total debt: $617,000 DTI: $617,000 / $120,000 = 5.14× before the lender's serviceability assessment.
Why DTI Limits Matter
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For Banks
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For You
Strategies to Improve Your DTI
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1. Increase Your Income
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2. Reduce Existing Debt
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3. Lower Your Borrowing Needs
DTI vs Other Lending Criteria
Banks also consider:
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LVR (Loan-to-Value Ratio)
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Credit Score
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Employment Stability
DTI in Practice: Real Examples
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Example 1: Single Buyer
Emma, 28, Auckland:
Options:
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Example 2: Couple
Mike & Sarah, Wellington:
Options:
What If You're Over the DTI Limit?
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Option 1: Reduce Your Borrowing
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Option 2: Increase Income
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Option 3: Reduce Debt
The Future of DTI Limits
The Reserve Bank reviews DTI limits periodically. Factors that could change the limit:
Stay informed by following RBNZ announcements.
Tools to Help
Use our [Borrowing Power Calculator](/guide/auckland/central) to:
Conclusion
Understanding DTI restrictions is useful, but the multiple is only one part of a lending decision. Focus on:
1. Maximizing your income 2. Minimizing existing debt 3. Saving the biggest deposit possible 4. Testing repayments at a higher rate and keeping an ownership-cost buffer
Remember, DTI is just one factor. A good mortgage broker can help you navigate all lending criteria and find the best solution for your situation.