Financial Obligation Ratio

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Financial Obligation Ratio

In personal finance, the ratio of mortgage payments, consumer debt payments, car payments and other debt to total disposable income. The financial obligation ratio shows how easily a person can make his/her debt service each month. This shows how likely a person is to default, which may affect his/her ability to take on more debt.
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The Financial Obligations Ratios for Homeowners and Renters
The financial obligations ratios for homeowners and renters also have different contours over time.
The second was to create a broader measure of household liabilities, the financial obligations ratio (FOR), which added recurring obligations--rent, auto leases, homeowners' insurance, and property taxes--that had not traditionally been included in the calculation of the DSR.
Separating homeowner and renter financial obligations also allows the creation of a renter financial obligations ratio. In general, renters have less income than do homeowners and are more likely to have trouble repaying their financial obligations.
The financial obligations ratio for renters is substantially higher than that for homeowners (chart 4).
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