Real Estate FinancingDebt-to-Income Ratio
Synonyms: DTI، Debt Burden Ratio (DBR)، Deduction Ratio، Debt Service Ratio
Last updated: 2026-09-25
Short Definition
The debt-to-income ratio (deduction ratio) is the ratio of a borrower's total monthly credit obligations to his total monthly income, used by lenders to assess repayment capacity and to set the maximum new installment that can be granted.
Overview
The debt-to-income ratio (deduction ratio) is the ratio of a borrower's total monthly credit obligations to his total monthly income, used by lenders to assess repayment capacity and to set the maximum new installment that can be granted.
In Saudi Arabia the Saudi Central Bank's Responsible Lending Principles for Individual Customers (Circular No. 465380000099 dated 2/9/1439H, amended by Circular No. 406940000001 dated 9/9/1439H) set tiered caps by income: for total income of SAR 15,000 or less, total obligations may not exceed 55% of income, rising to 65% for beneficiaries of mortgage products supported by the Ministry of Housing or the Real Estate Development Fund; for income above SAR 15,000 and below SAR 25,000 the cap is 65%; and for income of SAR 25,000 or more obligations are subject to the lender's policy with a mandatory affordability assessment. In the first two brackets non-mortgage obligations may not exceed 45% of income, and obligations linked to salary deduction may not exceed 33.33% for employees and 25% for retirees.
The calculation has important rules: gross salary counts in full, while other income (such as rent and dividends) counts at half its monthly average if its continuity is shown by at least a two-year bank statement; government support such as Citizen Account and social security is excluded, except housing support documented by contracts with the Ministry or the Fund in real estate finance. Obligations include all finance and loans, even from employers or relatives, and the minimum repayment on credit cards. Press reports in September 2025 said some banks cut the deduction for new mortgages to 55% for salaries below SAR 15,000 even for supported borrowers, so the lender's policy at the time of applying should be confirmed.
⚖️ Legal Basis
SAMA's Responsible Lending Principles for Individual Customers, issued by Circular No. 465380000099 dated 2/9/1439H (17 May 2018) and amended in Articles 14(c) and 15(c) by Circular No. 406940000001 dated 9/9/1439H: Article 13 (calculating obligations, including card minimum repayments and a buffer for variable-rate finance), Article 14 (calculating income) and Articles 15, 16 and 17 (deduction caps by income bracket). Article 13 of the Implementing Regulation of the Real Estate Finance Law requires the financier to verify the consumer's solvency and ability to repay.
💡 Practical Example
An employee in Qassim earns a gross salary of SAR 12,000, receives rent from a small apartment averaging SAR 4,000 a month documented by two years of bank statements, and gets Citizen Account support. His income is counted as 12,000 + half the rent 2,000 = SAR 14,000; the Citizen Account support is excluded. He is in the SAR 15,000-or-less bracket, so his obligations cap is 55% = SAR 7,700. He has a SAR 1,500 car installment (about 10.7% of income, below the 45% non-mortgage cap), leaving SAR 6,200 for a mortgage installment, i.e. finance of about SAR 1,009,600 at 5.5% over 25 years. If he were a housing-support beneficiary and the lender applied the 65% cap (SAR 9,100), the room would rise to SAR 7,600, still subject to LTV limits and the lender's policy.
⚠️ Common Mistakes
- ✗Believing the 65% maximum applies to everyone, when it is tiered: 55% for incomes of SAR 15,000 or less (with an exception for supported borrowers), 65% for the middle bracket, and the lender's policy for SAR 25,000 or more.
- ✗Counting additional income in full, when only half its average counts and only if its continuity is proven.
- ✗Including Citizen Account or social security support in income, which is not counted.
- ✗Leaving credit card minimum repayments and loans from relatives or employers out of obligations.
- ✗Assuming every bank applies the highest permitted cap, when lenders may apply lower ratios under their own policies.
🌍 International Differences
Most markets use a similar measure: in the UAE the central bank caps the debt burden relative to income; in the US a reference DTI ratio is used in qualified-mortgage standards; and several European countries apply prudential limits on debt or debt service to income. In Turkey and Egypt banks largely rely on internal policies and general guidance. Saudi Arabia stands out for caps tiered by income bracket and detailed rules on what counts as income and as obligations.
FAQs
What deduction ratio is allowed for home finance in Saudi Arabia?▾
Under the Responsible Lending Principles: 55% of total income for incomes of SAR 15,000 or less (65% for housing-support beneficiaries), 65% for incomes between SAR 15,000 and 25,000, and the lender's policy for SAR 25,000 or more.
Does rental income count in the debt-to-income ratio?▾
Yes, half its monthly average counts if its continuity can be verified by at least a two-year bank statement or official documents.
Does Citizen Account support count as income?▾
No. Government support such as Citizen Account and social security is excluded, except housing support documented by contracts with the Ministry of Housing or the Real Estate Development Fund in real estate finance.
Which obligations are counted in the ratio?▾
All monthly credit obligations: finance from banks, finance companies and government lenders, loans from employers or relatives, and the minimum repayment on each credit card.
What if the ratio exceeds the cap because a variable rate rises?▾
The Responsible Lending Principles require the lender to reschedule repayment periods without adding costs that breach the limits, as it is responsible for excess caused by a change in term cost.
