A debt-to-income ratio, usually shortened to DTI, compares total relevant debt with accepted gross annual income.
Registered banks apply DTI restrictions alongside their own servicing and affordability assessments, which may also consider expenses, existing commitments, credit conduct, deposit or equity, rental income and the proposed property. A high DTI does not automatically require a decline, but it may narrow the available bank pathways.
Under the current settings, banks may allocate up to 20% of new owner-occupier lending to borrowers with a DTI above 6 and up to 20% of new investor lending to borrowers with a DTI above 7. These are portfolio speed limits, not personal borrowing entitlements.
The basic calculation is:
DTI = total relevant debt ÷ accepted gross annual income
| Calculation | Amount |
|---|---|
| Total existing and proposed debt | $900,000 |
| Accepted gross annual income | $150,000 |
| Debt-to-income ratio | 6.0 |
Therefore, $900,000 ÷ $150,000 = a DTI of 6.
The calculation should reflect debt remaining after the proposed transaction, not only the new loan amount.
People sometimes use loan-to-income, mortgage-to-income and debt-to-income interchangeably. For New Zealand bank mortgage rules, DTI compares a borrower’s total relevant debt—including existing and proposed borrowing—with accepted gross annual income. Looking only at the proposed mortgage can understate the borrower’s overall DTI.
Multiplying income by six or seven does not establish how much a lender will approve.
The lender separately assesses affordability, living expenses, existing debt, credit facilities, accepted rent, tested repayments, income stability, contribution, credit conduct and the proposed property.
DTI describes the relationship between debt and income. It does not prove that the repayments are affordable.
Platinum Mortgages can help identify whether DTI, servicing or another part of the application is more likely to be constraining your borrowing position.
| Borrower type | High-DTI lending begins above | Registered-bank allowance |
|---|---|---|
| Owner-occupier | DTI of 6 | Up to 20% of new owner-occupier lending |
| Property investor | DTI of 7 | Up to 20% of new investor lending |
A DTI of exactly 6 for an owner-occupier is not above 6. A DTI of exactly 7 for an investor is not above 7. Being below the threshold does not guarantee approval, because banks may apply stricter internal criteria. Where DTI is high, the available bank lending amount or pathway may be more limited, but the outcome still depends on the complete application and the bank’s available high-DTI lending.
Depending on the transaction and applicable treatment, the calculation may include existing and proposed mortgages, personal loans, vehicle finance, student loans, credit exposure, overdrafts and other liabilities for which the borrower remains responsible.
| Debt | Amount |
|---|---|
| Existing home mortgage | $500,000 |
| Existing investment mortgage | $300,000 |
| Proposed investment lending | $250,000 |
| Other included debt | $20,000 |
| Total debt | $1,070,000 |
If accepted gross annual income is $160,000, the indicative DTI is $1,070,000 ÷ $160,000 = 6.69, or approximately 6.7.
The calculation uses income accepted by the lender. Depending on evidence and policy, this may include salary, wages, qualifying allowances, self-employed income, rental income and other recurring income.
The amount received and the amount accepted are not always the same. Rental income, bonuses, overtime and self-employed income may be adjusted or require additional evidence.
A new rental property increases total debt and may also add accepted rental income. The overall effect depends on the size of the mortgage, the rent accepted by the lender and the borrower’s existing position.
Adding rent to income without including the proposed mortgage creates an incomplete calculation. For investors with multiple properties, DTI can become more restrictive as total debt grows, even where equity remains strong.
| Assessment | What it measures | Question answered |
|---|---|---|
| DTI | Total debt compared with accepted gross income | Is total debt high relative to income? |
| Servicing | Income and expenses tested against assessed repayments | Can the borrower afford the proposed lending? |
| LVR | Lending compared with property security value | Is there enough deposit or equity? |
For the complete affordability and approval assessment, read how lenders assess an investment property mortgage.
For detailed contribution pathways, see investment-property deposit options in New Zealand.
Platinum Mortgages uses the following high-level review to separate the DTI calculation from the other factors that may determine whether a lending position is workable.
We identify the debt that will remain after the proposed lending is completed.
We review the income sources, supporting evidence and the income a lender may be able to accept.
We estimate the ratio using the complete post-transaction debt and accepted income.
We assess whether DTI is actually the main issue or whether another part of the application is more restrictive.
Angela Downie, Financial Adviser, Platinum Mortgages explains:
“One client came to me after their bank said they had ‘too much debt.’ They assumed they had exceeded the DTI limits, but when I reviewed the application, affordability was actually the bigger issue.
They had several personal loans and credit cards. Their total debt was not necessarily the main problem; the monthly repayments on those commitments meant they could not comfortably service both the existing debt and a new mortgage.
After reducing some short-term debt, their affordability improved significantly. We put a temporary lending pathway in place and helped them purchase through a specialist lender, and we are now close to refinancing them back to a main bank.
The key lesson is not to assume DTI is the problem simply because debt is mentioned. A full assessment is needed to understand what is actually limiting the application.”
This is why Platinum Mortgages treats DTI as one part of the complete lending assessment rather than as a standalone pass-or-fail test.
We identify whether practical changes to the borrower’s debt, evidence or proposed lending may improve the overall position.
We consider whether the complete application may fit an available bank or specialist lending pathway.
Where a suitable pathway exists, we prepare the supporting evidence clearly. Where it does not, we explain what may need to change and when the position could be reviewed again.
Some lending categories may be exempt from the DTI restrictions, subject to the Reserve Bank’s definitions and conditions. Examples include certain Kāinga Ora lending, qualifying refinancing without increased debt, portability, bridging finance, property-remediation lending and qualifying construction or new-build lending.
An exemption from the Reserve Bank restriction does not require the lender to approve the loan. Affordability and lender policy still apply.
The Reserve Bank DTI restrictions do not apply to non bank providers. Non bank lenders still apply their own affordability, credit, security and lending criteria.
Where a specialist pathway may be relevant, read about Platinum Mortgages’ non bank lending options.
This is not a promise that a non bank lender will approve a high-DTI application.
Paying down included debt may reduce the numerator, but using cash can also reduce the available contribution.
Unnecessary limits may affect the lender assessment and should be reviewed before applying.
Reliable supporting evidence may help a lender recognise qualifying income that might otherwise be excluded or reduced.
A lower purchase price or larger genuine contribution may reduce total debt.
Debt may reduce, income may become established or another commitment may end.
Different lenders may assess the same application differently, but lender selection cannot make unaffordable lending affordable.
Divide total relevant post-transaction debt by the gross annual income accepted by the lender.
Not automatically. A bank may use its permitted high-DTI allocation, but availability and complete approval are not guaranteed.
Yes. Relevant existing and proposed debt is included rather than only the new loan.
It may. The effect depends on how the credit facility is treated in the lender’s assessment, and whether repaying it would reduce cash needed for the contribution or financial buffer.
No. DTI is a debt-to-income comparison. Servicing tests whether repayments remain affordable after expenses and commitments.
Accepted rental income may improve the income side, but the proposed investment mortgage increases total debt. Both must be calculated together.
A useful review establishes the included debt, accepted income, indicative ratio and whether another calculation is actually more restrictive.
The objective is a sustainable, accurately presented application, not simply the lowest possible ratio.
Platinum Mortgages can review your complete debt and income position to help distinguish whether DTI itself, monthly debt commitments, accepted income or another lending assessment is more likely to be constraining the application, and explain whether there may be a realistic lending pathway or improvement plan.
Platinum Mortgages New Zealand Limited (FSP752271) is a Financial Advice Provider licensed and regulated by the Financial Markets Authority. Angela Downie (FSP742251) is a Financial Adviser at Platinum Mortgages who provides mortgage advice to New Zealand borrowers under that licence and has worked in the financial industry since 2006.
For DTI-constrained applications, Angela helps clients understand how total debt and accepted income affect their DTI position, whether DTI is actually the limiting factor, and how it fits within the wider lending assessment.
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