Debt-to-Income Ratio
Financial Supervisory Authority regulations FFFS 2018:10 (strengthened amortization requirement)
What does it mean?
The debt-to-income ratio (skuldkvot) is the relationship between your total debt and gross income (income before tax). It's expressed as a multiple — for example, a ratio of 4 means you have debts equal to four times your annual income. The debt-to-income ratio is a central metric that banks and the Financial Supervisory Authority use to assess household debt risk.
Since 2018, a strengthened amortization requirement applies to borrowers whose debt-to-income ratio exceeds 4.5 times gross income — they must amortize an additional 1% per year on top of the standard amortization requirement. In practice, this means your maximum borrowing capacity is limited by your income. Banks also perform a KALP calculation (disposable income after living costs) that can further limit the loan.
Key Points
- Total debt divided by annual gross income — expressed as a multiple
- Above 4.5x gross income triggers strengthened amortization (+1%/year)
- Central metric in banks' credit assessments
- KALP calculation (disposable income) can further limit the loan
- Both mortgages and other debts are included in the ratio
Practical Tip
Calculate your debt-to-income ratio before applying for a mortgage: total debt (including student loans, car loans, etc.) divided by gross income. If it exceeds 4.5, this means higher monthly costs through additional amortization. Consider paying off other loans first.
Legal Basis: Financial Supervisory Authority regulations FFFS 2018:10 (strengthened amortization requirement)
Based on content from Bofrid's Knowledge Bank