Calculating Debt - To - Income Ratio

Avoiding or Reducing Debt has always been a priority.

When we go to a bank to borrow some times they say that our debt ratio is to high. Basically what they mean is that our debt payments are more then 40% of our income. When the banks are calculating debt ratio they take in to consideration your credit cards, loans and credit lines. If you have mortgage with other bank and not add it to the total Then your calculation will not be accurate.
We can calculate oour ratio like this
Debts
1) 5 %of all credit cards available credit
2) 5%of all Credit lines available credit
3) Monthly mortgage payment
4) Monthly loan payments
5) Any other debts .

Add all this up and add up all your monthly income and then calculate your percentage of debt to your income if it is near or more then forty do not borrow any more.
Also add your insurance to this because it is also a fixed payments that way you have an exact figure of your debts.
Banks calculate your debt ratio similarly but it may not be a correct picture because you may not be using your credit cards or you line of credits at all so this is not providing you with an accurate picture. Hence remember one thing if you are not using your credit cards cancel them keep only one or two cards same goes for credit line keep only the one with low interest rate close all others.