Debt-to-income ratio

Your debt-to-income ratio is the total of all your monthly debt payments divided by your gross monthly income, expressed as a percentage. It includes installments on mortgagesTermMortgage×الرهن العقاريA loan secured by property, where the lender holds a claim on the house until the debt is repaid.Open the term, car loans, personal loans, credit cardsTermCredit card×بطاقة ائتمانA card that lets you borrow money to pay for purchases now and repay the bank later, usually with interest.Open the term, and any other regular debt obligations. If your monthly income is 10,000 and your debt payments total 3,000, your ratio is 30%.

Lenders use this ratio to assess whether you can handle additional debt. A lower ratio signals that you have room in your budget to take on a new loan; a higher one suggests you are already stretched. The threshold that matters varies by lender and by the type of loan you are seeking, but most conventional lenders become cautious as the ratio climbs. This directly affects whether you qualify for a loan at all, and if you do, what interest rateTermInterest rate×سعر الفائدةThe percentage of principal charged by a lender or paid by a saver, usually stated as an annual rate.Open the term you will pay. A household with a high ratio may find credit expensive or unavailable, while one with a low ratio has more negotiating power. The ratio also reflects a real constraint: if most of your income already goes to debt service, a single disruption to earnings or a rate increase on variable debt can tip you into default.

• The ratio includes all regular debt payments, not just the new loan you are applying for. A lender will add the proposed new payment to your existing obligations and recalculate.
• Different lenders set different thresholds. A mortgage lender may accept a higher ratio than a credit card issuer, because mortgages are secured by property.
• The ratio uses gross income, not take-homeTermDisposable income×الدخل المتاحThe money left after taxes and mandatory deductions, available to spend or save as you choose.Open the term pay. This can overstate your actual capacity if taxes and deductions are substantial.
• A low ratio does not mean you are financially healthy. It only measures debt relative to income, not whether you have savings, whether your income is stable, or whether you are spending more than you earn.