Enter the purchase price ($) and the yearly income ($) into the Calculator. The calculator will evaluate the Price To Income Ratio. 

Price To Income Ratio Formula

PTI = P / I

Variables:

  • PTI is the Price To Income Ratio ($/$)
  • P is the purchase price ($)
  • I is the yearly income ($)

To calculate Price To Income Ratio, divide the asset or purchase price by the yearly income.

How to Calculate Price To Income Ratio?

The following steps outline how to calculate the Price To Income Ratio.

  1. First, determine the purchase price ($). 
  2. Next, determine the yearly income ($). 
  3. Next, gather the formula from above = PTI = P / I.
  4. Finally, calculate the Price To Income Ratio.
  5. After inserting the variables and calculating the result, check your answer with the calculator above.

Example Problem : 

Use the following variables as an example problem to test your knowledge.

purchase price ($) = 60000

yearly income ($) = 20000

FAQs

What is the significance of the Price To Income Ratio?
The Price To Income Ratio is a financial metric used to measure the affordability of purchasing an asset, such as a house, relative to the income of the buyer. A lower ratio indicates more affordability.

How can the Price To Income Ratio affect my ability to secure a loan?
Lenders often use the Price To Income Ratio among other financial metrics to assess loan affordability and risk. A lower ratio suggests that you are less burdened by debt relative to your income, potentially making you a more attractive loan candidate.

Can the Price To Income Ratio vary by location?
Yes, the Price To Income Ratio can significantly vary by location due to differences in property values and average incomes. High-cost areas typically have higher ratios, indicating less affordability.

Is it better to have a high or low Price To Income Ratio?
Generally, a lower Price To Income Ratio is considered better as it indicates that the price of the purchase (e.g., a home) is more in line with or affordable based on your yearly income. However, the ideal ratio can vary based on individual financial situations and goals.