Financial Definition of Debt Ratio
Meaning of Debt Ratio
Total debt divided by total assets.
Related Entries of Debt Ratio in the Encyclopedia of Law Project
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Debt Ratio in Historical Law
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Legal Abbreviations and Acronyms
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Concept of Debt Ratio in the context of Real Property
A short definition of Debt Ratio: The ratio, expressed as a percentage, of a borrower’s monthly expenses to gross monthly income. There are two ratios. The first is the expense of the property to income. This includes the mortgage payment, taxes and insurance. The second is the total expense to income. This includes car payments, credit card payments, etc. Acceptable numbers for almost any loan would be 25% property expense to income and 35% total expense to income. The percentages may be much higher, especially for a hard money mortgage.
Concept of Debt Ratio in the context of Real Property
A short definition of Debt Ratio: The ratio, expressed as a percentage, of a borrower’s monthly expenses to gross monthly income. There are two ratios. The first is the expense of the property to income. This includes the mortgage payment, taxes and insurance. The second is the total expense to income. This includes car payments, credit card payments, etc. Acceptable numbers for almost any loan would be 25% property expense to income and 35% total expense to income. The percentages may be much higher, especially for a hard money mortgage.
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