debtservicetoincome

Debt service to income (DSTI) is a financial metric used in lending to assess a borrower’s ability to service monthly debt payments from their income. It expresses what portion of gross income is committed to debt obligations, helping lenders gauge repayment capacity.

Calculation and components: DSTI is typically calculated as total monthly debt payments divided by gross monthly income. Debt payments can include housing costs such as mortgage or rent, plus other recurring obligations like car loans, student loans, credit card minimums, and alimony or child support. In some lending frameworks, housing costs are handled separately (as gross debt service, GDS) and DSTI refers to the broader debt service burden, or is calculated using different income bases (for example gross vs net income). Practices vary by jurisdiction and lender.

Interpretation: A lower DSTI indicates a smaller share of income is already committed to debt, suggesting greater capacity to take on additional borrowing. A higher DSTI points to a heavier debt burden and can lead to tighter underwriting, higher interest rates, or loan denial. DSTI is often a key input in determining the maximum eligible loan amount and monthly payment.

Usage and limitations: DSTI is used alongside other measures such as debt-to-income (DTI) ratios and, in housing finance, gross debt service (GDS) and total debt service (TDS). Thresholds differ by country, lender policy, and borrower profile. DSTI does not capture income volatility, irregular earnings, or non-debt financial obligations, and should be considered with a broader affordability assessment.