GLOSSARY

Canadian Financial, Real Estate and Mortgage Glossary

Debt-to-Income Ratio

Synonyms:	back-end ratio, front-end ratio
Filed Under:	financial-banking, mortgages
Tags:	banking, debt, mortgage

debt-to-income ratio: 1. A ratio used to show how much of an individual's income goes toward debt repayments. The Debt-to-Income Ratio (DTI) can be used by lenders to determine an applicant's ability to repay a loan.

debt Money one person or firm owes to another person or firm.
debt/equity ratio A comparison of debt and equity used to measure the health of a business.
gross debt service (GDS) The total monthly mortgage (or rent) payments, property taxes, utilities and maintenance fees as a percentage of gross monthly income.
➥ Used by mortgage lender underwriters to determine one's ability to qualify for a mortgage loan.
income The money earned in a specific time period.
loan Letting another party use something of value temporarily.
mortgage (mtg) A mortgage is a contract stipulating a specific real property, typically a residence or building, as collateral for a loan. The mortgage incurs a rate of interest that varies according to term and other features.
total debt service (TDS) The ratio of a borrower's total monthly debt payments to his or her monthly gross income. Lenders use this ratio to determine how much of a loan a borrower is qualified for.
total expense ratio (TER) The percentage of monthly debt payments compared to total before-tax income.