Two lenders can look at identical financials and reach opposite conclusions. The most common reason is the debt-to-income ratio, and specifically whether the lender treats it as a hard line or a warning sign.
DTI is your total debt divided by your gross annual household income. Borrow $800,000 on a combined income of $130,000 and your DTI is roughly 6.2x. Whether that is fine or fatal depends entirely on who is assessing it.
The caps, lender by lender
These are the positions across the ten lenders NIK Finance models in full policy detail. They are the same figures the Kreddi Score engine assesses against.
| Lender | Type | DTI position | |---|---|---| | Macquarie | Bank | 8x hard cap, above 6x limits you to 80% LVR | | ANZ | Big 4 | 7.5x to 8x hard cap | | Great Southern Bank | Customer-owned | 7x owner-occupier, 8x investment, at 80% LVR or below | | NAB | Big 4 | Under 7x | | Qudos Bank | Credit union | Under 7x owner-occupier, under 6x investment | | ME Bank | Bank | 6x to 7x, tiered by LVR | | CBA | Big 4 | No hard cap stated, alert triggered above 6x | | HSBC | Foreign bank | 6x or above triggers scrutiny | | Firstmac | Non-bank | No hard cap, review triggered at 8x or above | | Bluestone | Non-bank specialist | No hard cap stated |
That spread is the whole point. A borrower at 7.2x is declined outright at NAB and Qudos, approved at ANZ and Macquarie subject to LVR, and assessed on other merits at Firstmac and Bluestone.
Same borrower. Same income. Same debts.
What counts as debt, including the bit that surprises people
Lenders include more than most borrowers expect:
- The new loan you are applying for
- Any existing mortgages, including investment properties
- Personal loans and car loans
- Buy now pay later facilities, treated as a commitment at most lenders
- HECS or HELP, in some lender policies
- The full approved limit of every credit card, not the balance
That last one does more damage than anything else on the list. A $30,000 card that you clear every month and have never carried a balance on is assessed as $30,000 of debt. On a $130,000 income that is 0.23x of DTI, spent on nothing.
Reducing or closing unused credit limits is the fastest, cheapest way to improve your DTI, and it can be done in a week.
The buffer is the other half of the story
DTI is a ratio test. Separately, lenders stress test your ability to repay at a rate well above the actual one, which is the serviceability buffer.
APRA's guidance is 3 percentage points above the product rate, and most lenders apply it. Across the panel we model:
| Lender | Buffer | |---|---| | ANZ | Standard variable rate plus 3%, floor 5.10% | | CBA | Standard variable rate plus 3%, floor 5.40% | | Macquarie | 3% | | Great Southern Bank | 3% | | Qudos Bank | 3% plus a 7.25% floor rate | | Firstmac | Weighted average rate plus 2%, floor 6.25% | | Bluestone | 1.5% to 2%, the lowest on our panel |
That Bluestone figure is worth understanding. A 1.5 percent buffer instead of 3 percent means your repayments are assessed at a materially lower rate, which increases your assessed capacity by a meaningful margin. It comes with a higher actual rate, so it is not free, but for a borrower who is genuinely close it can be the difference between a decline and a settlement.
Refinancing customers get a further concession at some lenders. Where you are switching a loan you have already been servicing, some lenders apply a reduced buffer of around 1 percent, on the reasonable logic that you have demonstrably been paying it.
Investors: shading makes it worse
If you are counting rental income, lenders discount it before it hits your calculation. This is called shading, and it accounts for vacancy, management fees and maintenance.
Across our modelled panel, shading ranges from 90 percent at ANZ, CBA, NAB, ME Bank and Great Southern Bank, down to 75 percent at HSBC and Macquarie.
On $40,000 of annual rent, that is the difference between $36,000 and $30,000 counting towards your income. A $6,000 gap changes your DTI, and on a marginal application it changes the answer.
How to lower your DTI, in order of speed
This week. Reduce or close unused credit card limits. Cancel buy now pay later accounts you are not using. Both are counted against you whether you use them or not.
This month. Pay out a small personal loan or car loan if you have the cash. Clearing a $12,000 car loan removes it from your commitments entirely, which usually helps more than the equivalent amount of extra deposit.
This quarter. Increase documented income. A pay rise, a second income earner added to the application, or, for self-employed borrowers, lodging your most recent tax return so a stronger year can be assessed.
Structural. Buy at a lower price point, increase the deposit, or add a guarantor. All of these change the numerator or the denominator rather than working around them.
Why this is a lender selection problem
If your DTI is under 6x, most of this is academic and you have a wide choice.
Between 6x and 7x, which lender you apply to starts to matter more than the rate you are chasing. Above 7x it matters more than everything else combined, because a decline at a hard-cap lender is not a negotiation, it is a policy line.
The expensive mistake is applying blind, getting declined, applying again, getting declined again, and accumulating credit enquiries that make the third application harder than the first would have been.
Your Kreddi Score assesses your position against real lender policy, including these DTI caps and buffers, and shows which lenders are open to you before you apply anywhere. It takes 15 minutes and leaves no mark on your credit file.
Frequently Asked Questions
What is a good debt-to-income ratio for a home loan in Australia? Under 6x total debt to gross income is comfortable at almost every lender. Between 6x and 7x you are fine at some and under scrutiny at others. Above 7x your options narrow sharply, and above 8x only lenders without a hard cap will consider you.
Which Australian lenders have the highest DTI cap? Of the ten lenders NIK Finance models in detail, Macquarie applies a hard cap of 8x, and Firstmac and Bluestone state no hard cap, assessing DTI as one factor rather than a pass or fail line. Most major banks sit between 6x and 7.5x.
How is DTI calculated for a home loan? Total debt divided by gross annual household income. Total debt includes the new loan, existing mortgages, personal and car loans, HECS in some lender policies, and the full limit of every credit card whether you use it or not. That last one catches most people out.
Does a high DTI mean I will be rejected? Not automatically. At lenders with a hard cap it is a decline. At lenders without one it triggers closer review of your income stability, surplus and credit conduct. This is why lender selection matters more than any other decision when your DTI is elevated.
Do credit card limits count towards DTI? Yes, and lenders count the full approved limit rather than your balance. A $30,000 credit card you pay off monthly and never carry is still assessed as $30,000 of debt. Reducing or closing unused limits is the fastest way to lower your DTI.
Find Out Which Lenders Your DTI Passes
A DTI that fails at one lender clears comfortably at another. Applying blind and collecting declines is the expensive way to find that out.
Your Kreddi Score assesses your position against the DTI caps, buffers and income shading policies described above, and shows which lenders are open to you before you apply. It is free, takes about 15 minutes, and leaves no enquiry on your credit file.
Lender policy positions reflect the policies modelled in the NIK Finance scoring engine and should be confirmed at the time of application, as lenders revise them without notice. This is general information, not personal advice. NIK Finance Pty Ltd is a Credit Representative (567387) of Finsure Finance & Insurance Pty Ltd, Australian Credit Licence 384704.