Our debt to income ratio calculator helps you determine how much of your disposable monthly income is going toward paying down your debt. After you have entered your information, the calculator summarizes your results and displays your debt-to-income ratio.
Your Calculator Inputs
We only require three fields:
- Monthly Gross Income: How much income do you earn each month (before taxes and deductions)?
- Monthly Mortgage Payment: How much money do you spend on your mortgage loan monthly?
- Total Debt: Do you have any consumer debt?
The total outstanding balance on consumer debt you owe includes credit cards, car loans, personal loans, student loans, and consolidated debt loans. Do not include your mortgage payment.
Press 'Calculate' to estimate your Debt-to-Income Ratio.
Understanding Your Results
Our debt-to-income calculator analysis estimates the Debt-to-Income Ratio based on your inputs. You can evaluate whether your current debt is manageable by analyzing your income, mortgage payments, and consumer debt load.
Interpreting your debt calculator results involves a few steps. Here’s how to break down and understand what the calculator is telling you:
Step 1: Understand What You Entered
Before interpreting the result, double-check your entries:
- Monthly Gross Income – Your gross monthly income (your paycheck amount before taxes or deductions).
- Monthly Mortgage Payment – Your monthly payments for housing debt, typically including principal, interest, property taxes, and homeowner's insurance.
- Total Debt – This includes all other monthly debt payments (except the mortgage), such as:
- Credit card minimum payments
- Car loan payments
- Student loans
- Personal loans
- Any other recurring loan obligations
Step 2: See Your Debt-to-Income (DTI) Ratio
Once you hit ‘Calculate’, the tool uses this formula:
DTI Ratio (%) = ((Monthly Mortgage Payment + (Total Debt / 12)) / Monthly Gross Income) × 100
It combines your monthly housing and consumer debt payments, divides that by your gross monthly income, and expresses the result as a percentage.
Step 3: Interpret the DTI Percentage
The calculator gives you a percentage. Here’s what that number generally means:
| DTI Ratio | What It Means |
|---|---|
| Below 36% | Good: Lenders view you as a low-risk borrower. You have room to take on more debt if needed. |
| 36%-43% | Fair: Still acceptable, especially for mortgage approval, but monitor your spending. |
| 43%-50% | Warning zone: You may qualify for some loans, but rates or terms might not be favorable. |
| Above 50% | High risk: Your debt level is too high relative to your income. Consider paying down debt before applying for new loans. |
Step 4: What to Do With Your Result
Depending on your result, you can take action:
- Low DTI (under 36%): Great position to apply for a mortgage, car loan, or other credit.
- Moderate DTI (36%–43%): You’re on the edge. Consider reducing debt before taking on more.
- High DTI (above 43%): Focus on debt repayment strategies like snowball or avalanche methods, or consider debt consolidation to lower your payments.
What Is a Debt-to-Income Ratio?
The Debt-to-Income ratio (DTI) is a financial metric that compares your monthly debt obligations to your gross monthly income, expressed as a percentage. It helps lenders assess your financial health, ability to manage payments, and ability to repay borrowed money.
Lenders often break this down into two specific calculations:
Front-End DTI Ratio (or Housing Ratio)
The front-end ratio focuses only on your housing-related expenses compared to your gross monthly income.
Components:
- Total Monthly Housing Costs: This typically includes the "PITI":
- Principal payment on your mortgage
- Interest payment on your mortgage
- Property Taxes (monthly portion)
- Homeowners Insurance (monthly portion)
- It may also include Homeowners Association (HOA) dues or condo fees, if applicable.
- If you are renting, this would be your monthly rent payment.
- Gross Monthly Income: Your total income before taxes or deductions.
Lenders use this to understand how much of your income is consumed by housing costs alone. It helps gauge the affordability of the potential mortgage or rent payment itself.
Back-End DTI Ratio (or Total Debt Ratio)
The back-end ratio (calculated by this tool) is more comprehensive, comparing all of your recurring monthly debt payments (including housing) to your gross monthly income. This is the ratio most commonly referred to simply as "DTI."
Components:
- Total Monthly Debt Payments: This includes:
- Your Total Monthly Housing Costs (PITI + HOA, as defined above)
- Minimum credit card payments
- Car loan payments
- Student loan payments
- Personal loan payments
- Alimony or child support payments you make
- Any other installment loans or required minimum debt payments appearing on your credit report.
- This calculation does not include other monthly bills that are not tied to recurring debt payments.
- Gross Monthly Income: Your total income before taxes or deductions.
This ratio gives the lender a broader picture of your overall debt load and ability to manage all your financial obligations, including the potential new loan payment.
Key Differences & Usage
- The Front-End DTI focuses solely on housing costs.
- The Back-End DTI includes housing costs plus all other regular debt payments. It is generally considered the more critical indicator of overall financial capacity to take on new debt.
Lenders, especially mortgage lenders, typically evaluate both ratios. To qualify for a loan, you usually need to meet the lender's threshold for both the front-end and back-end DTI.
Understanding both ratios helps you see how lenders view your financial situation and where potential hurdles might exist when applying for credit, particularly a mortgage.
How Much Debt Is Too Much?
A "lot of debt" depends on your income, expenses, and overall financial situation—but financial experts often use the Debt-to-Income (DTI) ratio to gauge it. Here's a quick breakdown:
- DTI over 43% is typically considered too high by most lenders and may signal you're carrying more debt than you can comfortably manage.
- Types of debt also matter. High-interest consumer debts (like credit cards) are riskier than low-interest ones (like mortgages or student loans).
- If your debt causes missed payments, financial stress, or limits savings, it’s likely too much, regardless of the DTI.
In general, debt becomes a problem when it interferes with your ability to meet financial goals, emergencies, or essential living expenses.
Good Debt vs. Bad Debt
Not all debt is created equal. While some debt can help you build wealth or achieve important life goals, other types can quietly sabotage your financial health. Understanding the difference between good debt and bad debt is essential for making smarter borrowing decisions and protecting your long-term financial future.
| Feature | Good Debt | Bad Debt |
|---|---|---|
| Primary Purpose | Acquire assets that increase in value or boost future income | Fund consumption or assets that quickly lose value |
| Typical Examples | Mortgages, student loans | Credit card debt (for consumption), loans for rapidly depreciating items |
| Financial Impact | Can potentially help improve long-term financial standing | Doesn't improve long-term financial standing |
| Management Focus | Manage responsibly | Prioritize elimination (especially high-interest) |
What Happens If You Have Too Much Debt?
Excessive debt creates significant financial strain, making it hard to afford necessities or handle emergencies. It also damages your credit score and hinders your ability to afford future loans, rent housing, or access other services.
High debt puts you at risk of losing assets like your home or car through foreclosure or repossession, can result in aggressive collection actions or lawsuits leading to wage garnishment, prevents saving for long-term goals like retirement, and ultimately limits your life choices and overall financial security.
What Can You Do If You Have Too Much Debt?
Finding yourself with too much debt can be challenging, but there are concrete steps you can take to regain control. Here's a breakdown of strategies:
First, honestly assess your debt situation by listing all debts, balances, interest rates, and calculating your Debt-to-Income ratio. Next, create and stick to a strict budget, cutting non-essential spending to free up cash for debt repayment beyond the minimums, and commit to stopping the addition of new debt.
Choose a debt repayment strategy like the Snowball (smallest balance first for motivation) or Avalanche (highest interest first to save money), and actively look for ways to increase your income, dedicating extra earnings to debt.
Explore options to lower interest costs, such as balance transfers (watch for fees/expiring rates), debt consolidation loans, or negotiating directly with creditors; use home equity loans cautiously, as they risk your home.
If needed, seek help from reputable non-profit credit counseling agencies, which offer budget advice and may suggest a structured Debt Management Plan (DMP). As a last resort, carefully consider major options like debt settlement (risky) or bankruptcy only after consulting with qualified professionals due to their significant downsides. Tackling debt requires time and discipline, but taking consistent action is key.
How Much Credit Card Debt Is Too Much?
There's no single dollar amount, as "too much" depends on your ability to manage it. Ideally, you should carry zero balance month-to-month to avoid high interest. Credit card debt is generally considered excessive if:
- You can't pay the balance in full each month, forcing you to pay high interest charges.
- Your Credit Utilization Ratio (balance relative to limit) is above 30%, negatively impacting your credit score.
- You can only afford the minimum payments, meaning the debt will take years and excessive interest to pay off.
- The payments strain your budget, preventing you from covering necessities, saving, or meeting financial goals.
- It causes significant financial stress, or you rely on cards for everyday essentials.
Sources
- What is a debt-to-income ratio? - Consumer Financial Protection Bureau. https://www.consumerfinance.gov/ask-cfpb/what-is-a-debt-to-income-ratio-en-1791/
- What Is a Good Debt-to-Income Ratio? - Lending Tree. https://www.lendingtree.com/debt-consolidation/whats-a-good-debt-income-ratio/
