When assessing whether a client can service a loan, some lenders measure the borrower's capacity using a Debt Service Ratio (DSR) calculation. The DSR is calculated by dividing the applicant's financial commitments (including the repayments on the proposed loan) by the verifiable income. A representation is below:

DSR =	Financial Commitments (annually)
	Gross Taxable Income (annual)

The Ratio should not exceed 35% and the lower the Ratio, the stronger the application. On occasion this figure can be greater, particularly when the applicants are on a high income. This will normally mean that their surplus income remains high despite their commitments. Their surplus income is calculated as follows:

Surplus Income = Gross Taxable Income - Financial Commitments

Most Lenders require a minimum annual surplus income of between $12,000 and $15,000, however this is not a firm requirement, and varies from loan to loan and lender to lender.