Rental income home loan

How much rental income will the banks accept?

Every lender has their own way of assessing the rent you receive from your investment properties.

As a general rule lenders will take 80% of your gross rental income and will enter this in their serviceability calculator along with other income such as your salary. Read on for more information.

How banks assess rental income

Not every lender assesses this income in the same way. Some will only use 75% of rent, some will not apply tax to the rent, others will.

In particular many lenders differ on the way they assess negative gearing benefits and the assessment rates they use to calculate the impact of your current debt commitments.

Major banks and other lenders tend to vary significantly in the amount that they will lend to property investors.

To make sure you get approval, discuss your situation with our mortgage brokers today on 1300 889 743 or enquire online and we can ensure that you get the best mortgage around!

Why do most banks only accept 80%?

The reason lenders use only 80% of your rent is that they assume that 20% of the rent you receive will be used to pay for managing agent’s fees, council rates, strata levies, repairs and to cover for any vacancies.

However, each lender has a different policy so it is best to call us on 1300 889 743 or enquire online and our mortgage brokers will help you apply for a loan with the right lender.

Which lenders can accept 100%?

One of our lenders can consider assessing your loan using 100% of your rent income.

In addition to this they will also assess your existing debts at the actual repayments rather than at a loaded assessment rate.

This drastically increases the borrowing power of investors with positively geared properties.

How we can help!

Want to make all your rental income count? Contact us on 1300 889 743 or enquire online and our mortgage brokers will help ensure that all your income sources count!

My bank declined my loan because I am “rent reliant”!

Did you know that earning too much rental income is considered to be a bad thing?

Successful property investors often hit a wall once they are earning more income from rent then they are from their salary.

From a lenders point of view highly exposed investors tend to be high risk borrowers as they can be affected by market downturns more severely than normal home owners.

Major banks rent reliant policy

Below is an example of the “rent reliant applicant” policy of one of our lenders:

“Where significant portion of borrower’s income is derived from rent and the proposal is heavily reliant on rent, the application may be considered too rent reliant.
Level of gross rental accepted for servicing should not exceed:

• 40% of gross salary or wage for incomes less than $60,000
• 65% for incomes $60,000 – $100,000
• 70% for incomes greater than $100,000″

If you are classified as rental reliant then the banks may decline your application or only take part of your rent income into account when assessing your loan.

Did you know that not every lender considers rent reliance to be a problem?

Please call us on 1300 889 743 or enquire online to talk to our mortgage brokers about your property portfolio.

Professional investor loans

We commonly help professional investors who have 10 to 50 investment properties and want to grow their portfolio.

There are three ways that we can help professional investors to prove their income and continue expanding their portfolio:

• 80% Of Rent Income Method: This is the standard method used by most banks to assess rent income. One of our lenders can accept 100% of your rental income if you are not reliant on negative gearing (positively geared investors only).
• Financial Statements Method: We provide the last two years tax returns or financial statements to show your actual profits from investing rather than the banks “rule of thumb” method using only 80% of your rent income. One of our lenders can then assess your mortgage on its merits.
• Professional Investor Low Doc Loan: One of our lenders allows you to declare your rent income instead of providing rental statements, tenancy agreements and tax returns. This is helpful if your situation is complex or you cannot prove your full income.

Which method is right for you?

We usually complete an analysis of your situation and then go with the option that will give you the best possible outcome, be that to reduce your interest rate or increase your borrowing capacity.

Our mortgage brokers are specialists in the rent income policies used by the banks.

Please call us on 1300 889 743 or enquire online to talk to them about your property portfolio.

Renting to your family

Many investors decide to buy investment properties close to their own home and then to lease them out to their extended family.

By keeping it in the family you can reduce your risk of having troublesome tenants and enjoy having your family close by.

Unfortunately many people who rent to their family have a hard time proving the rent income that they earn as there is no managing agent and often no formal tenancy agreement in place.

Which lenders can help?

We know which lenders will take these factors into account and may accept alternate evidence of your rental income.

In most cases, the banks will require a letter from your family, tax returns or a transaction history showing credits to your bank account.

If you are renting to your family please call us on 1300 889 743 or enquire online and we can help you make your rental income count!

Housemate income / sub tenants

First home buyers that want to buy a 2 or 3 bedroom home but do not have the income to afford it may lease out a room to a friend, technically this is known as leasing to a sub tenant.

Again this can cause trouble when applying for a loan as almost all lenders do not take any rent from flatmates into account when assessing if you can afford a loan.

It is possible to get a home loan depending on the percentage of the property value you are borrowing, how reliant you are on the income from your flatmate and what evidence you can provide to show the rent income.

These situations can be a little trickier, so please call us on 1300 889 743 or enquire online to talk to our mortgage brokers about your rent income.

Rent from a dual occupancy

We commonly have applicants that have a property that has two dwellings on it, often in the form of a duplex, granny flat, house that has been converted into multiple units or a block of land with two houses on it.

Proving the rent income from these types of properties are generally no problem as in most cases formal tenancy agreements are in place.

If you are wishing to apply for a mortgage, contact us on 1300 889 743 or enquire online and our expert mortgage brokers can help you get approval today!

Rent to buy & vendor finance

Vendor finance, wrap strategies & rent to buy schemes have become increasingly more popular in recent years, particularly with investors that follow Steve McKnight or other popular property investment writers.

One of the biggest problems that these investors have is that as their portfolio grows banks begin to say that these investors cannot afford their level of debt, even though in actual fact most of the properties are positively geared!

This problem stems from the way lenders assess loans. For more information or to apply for a mortgage, please contact us on 1300 889 743 or enquire online today!

How do lenders assess these loans?

They may assess your repayments at principal and interest over 30 years at an interest rate that is 1.5% to 3% higher than the actual rate that you are paying.

To get the best rate possible, speak to our mortgage brokers on 1300 889 743 or enquire online. Our expert team can help you get the best package around!

How much of this income do lenders accept?

Most lenders only take 80% of your Wrap income into account and ignore that your tenant is paying for council rate and other outgoings.

As a result your investing grinds to a halt.

Some lenders are not as conservative with investors earning wrap & rent to buy income.

The secret to success with wrapping properties is in choosing lenders with low LMI, low exit fees and a credit department with an appetite for investors with wrap income.

To find out which lender will give you the best package around please call us on 1300 889 743 or enquire online and our expert team will help you get a competitive loan package with great rates.

Apply for an investment loan

We are mortgage brokers that specialise in finding solutions for people who are in situations that are outside of the box, in particular for investors that earn rental income that is difficult to prove or does not meet standard guidelines.

If you would like to know how we can help with your home loan then please call us on 1300 889 743 or enquire online.

Our mortgage brokers are experts in helping people get the most out of their income sources. Speak to us today!