You can calculate your debt-to-income ratio yourself, which is one of many methods mortgage lenders use to determine risk and affordability. You can quickly assess your finances and take the necessary steps to make your mortgage application more viable.

How to calculate the debt to income ratio

The debt to income ratio is calculated using the following formula:

(total monthly debt payment) /(total gross monthly Income)

This amount can be converted into a percentage by multiplying it by 100.

What is considered a debt?

It can be difficult to define debt. When calculating DTI mortgages, companies include your current mortgage payments, but if currently renting, this is not a debt. Overdrafts and other borrowings are classified as debt, but they don’t have to be paid monthly. What counts as recurring monthly credit?

Housing costs

The amount that your prospective lender will use to calculate the cost of a mortgage is what you should be using. Even if you plan to sell your house or are renting, the monthly payment value of the mortgage is what you should use. For help from a Mortgage advisor Gloucester, contact https://www.geniusma.com

Card bills

Calculate based on the minimum monthly payment. This can be misleading, and it is better to go higher. Minimum payments do not show a real intent to pay off debt.

Calculate your minimum monthly payment by 1.5x.

Vehicle financing

Include this amount, whether you bought or leased a vehicle. The amount you paid for insurance, vehicle excise tax (road taxes), or your monthly fuel bills are not included.

Personal Loans

Add the monthly payment of any personal loans that you have with a bank or peer-to-peer lender service.

Overdraft

You will put your chances of getting a mortgage in danger if you live constantly on an overdraft. Paying off an overdraft as quickly as possible is a good idea.