Australian lenders have strict requirements for letters confirming your rental income, and will often ask for a letter to be amended if it does not meet their requirements.

Read on to find out how to get your rental letter right.


Bank requirements for rental letters

Your rental letter should:

  • Be dated.
  • Be signed.
  • Confirm your name and the address of your investment property.
  • Confirm the current rent, estimate market rent or give a range of the likely rent.
  • Contain the name of the person who signed the letter.
  • Be on a letterhead that contains the company details of the managing agent or selling agent.

Most lenders will accept a faxed copy of your rental ledger. However, some will require your mortgage broker to hold the original on file.

Please be aware that there can be big differences in the way that banks assess rental income. As a result, there’s often a lot of variation in the amount they will lend to investors.


Rental letter template: not currently rented

1/1/2015

To Whom It May Concern:

Re: Rental potential of 1 George Street, Sydney NSW, 2000

Further to our inspection of the above property, we submit the following opinion.

We feel that the above property in the current rental market will realise in the vicinity of $600 per week. We base our opinion on current market trends and recent comparable rentals in the area.

We thank you for the consideration and hope we can be of service.


Regards,

(SIGN)

Paul Adams
Property Manager
1 Pitt St Sydney NSW 2000
Ph 02 9000 0000


Rental letter template: tenanted

1/1/2015

To Whom It May Concern:

Re: Current rental of 1 King Street, Sydney NSW 2000

We are the managing agents of the above mentioned property.

The property is currently rented for $500 per week, which we believe to be a fair market rent for this type of property.

Should you have any further queries please feel free to contact our office.


Regards,

(SIGN)

Paul Adams
Property Manager
1 Pitt St Sydney NSW 2000
Ph 02 9000 0000


Why might a bank need a rental letter?

You’re required to provide the bank with a rental letter so that they are aware of the total amount of rent income that you will receive.

This will enable them to accurately assess your loan and determine how much you’re entitled to borrow, to fund your investment property purchase.


How can rental income be proven?

Your rental income can be proven in the following ways:

  • Letter from an agent confirming market rent (ideal if the property is not yet tenanted / also very simple for the bank).
  • A bank valuation (if a full valuation is completed).
  • A rental statement issued by the managing agent.
  • A copy of the lease agreement (may also need letters informing tenants of rent increases if lease has gone up).
  • Bank account statements showing the rent paid in (not reliable as managing agents take fees and bills out first and often the payments are not clearly labelled).

What is a rental letter?

A rental letter is a letter from a property manager or selling agent that confirms the current market rent of a property.

It details all of the relevant particulars so that the banks know how much you’ll be receiving from that property each week.

This way, they can calculate your anticipated income and determine if you’ll be able to afford the loan.


How is rent determined?

The agent will inspect the property and estimate the potential or current rent income for the property by comparing it with similar investment properties in the area.

For example, if you own a two bedroom home in Burwood, the agent will look at homes similar to yours that are currently on the rental market.

Depending on the differences in features between both houses, the estimated market rent will be increased or lowered accordingly. Some agents will give a range instead of an exact figure to allow for the uncertainties and fluctuations associated with the rental market.


Apply for a home loan

We can talk to your agent directly to obtain a rental letter that meets the bank’s requirements! Our mortgage brokers will help get your loan approved.

Please call us on 1300 889 743 or fill in our free assessment form to speak to one of our experienced staff who can help you apply for a home loan and take care of all the stressful paper work.

  • Margaret

    My cousins are staying in my investment property and they all pay in cash to me, so there’s no tenant ledger. Will the bank accept it as my income?

  • Hi Margaret, if you are using your rent as genuine savings then the banks want to see your rental history through a rental ledger or a letter from the agent. It is very unlikely that the bank will accept an exception to this policy.

  • GeorgiaP

    I’d like you guys to have a look at my rental letter and my situation too. Where can I send in my details?

  • Hey GeorgiaP,

    You can email us a copy of your rental letter as well as your situation and loan needs at info@homeloanexperts.com.au or simply speak with one of our expert mortgage brokers by calling 1300 889 743.

  • Brifman

    I can provide a rental letter and meet above requirements so can you help me get an estimate on my borrowing power with rent income now included?

  • Hello Brifman,

    You can try out our serviceability calculator to get an accurate indication of your borrowing power. It takes your income and expenditure and combines the exact method used by the serviceability calculators of three banks in its assessment. Here’s the link to the calculator:
    https://www.homeloanexperts.com.au/how-much-can-i-borrow/

  • Dorian

    Hi, do you have any downloadable resources or any other type of mortgage info that I can download?

  • Hey Dorian,

    You can check out the resources section on our website for online EBooks, slides and videos that you may download to learn and share home loan and mortgage info. Here’s the link to the section:
    https://www.homeloanexperts.com.au/resources/

  • dude

    Hey, my wife and I want to buy an investment property for $800k. We own 5 smaller investment properties and currently have a $500 LOC with $200k used. We don’t seem to service so can you help? We do earn rent with the rest of the properties and can provide rent letters.

  • We recommend reducing the LOC limit to help with the serviceability and we can help you find the right lender for your situation so please call 1300 889 743 and discuss your personal situation and loan requirements in detail with one of our investment loan experts.