Which factor is calculated in the total obligations ratio (TOR)?

The total obligations ratio (TOR) is a vital financial metric used to assess a borrower's ability to manage monthly debt payments relative to their income. Specifically, this ratio is calculated by taking the total monthly obligations, which include all the borrower's recurring debt payments, and dividing that figure by their monthly gross income.

This calculation illustrates the proportion of a borrower’s income that is allocated towards paying off debts, providing lenders with insight into the borrower's financial stability and capacity to take on additional debt. A higher TOR may indicate a higher risk for lenders, as it suggests that a significant share of a borrower’s income is already committed to debt repayment, potentially making it more challenging for them to meet additional financial obligations.

The other options do not accurately reflect the calculation method for TOR. They involve different relationships between income and obligations that do not align with the standard definition and calculation of this crucial metric.