Ronaldo asked:
For example if my 1st mortgage is $1000 per month and i charge a rental income of $1000 per month, is it a wash? Or do i get the $1000 rental income added to my gross monthly income and have the $1000 mortgage payment added to my monthly liabilities?
For example if my 1st mortgage is $1000 per month and i charge a rental income of $1000 per month, is it a wash? Or do i get the $1000 rental income added to my gross monthly income and have the $1000 mortgage payment added to my monthly liabilities?
you would do the latter on the mortgage application. the 1000 dollar rent you are collecting would be income (and therefore taxable), and the 1000 mortgage payment is a debt (liability).
You are actually not charging enough. You are only allowed to take 75% of your rental income, so it is not a wash.
When you apply for a mortgage on a second property and intend to use the first home as an investment you are able to duse that as income. Most banks will give you 75% of what your rent is as usable income. That 75% will be added to your income and you can offset that against your debt If you have any other questions just email me
I’ve been through this several times. A lot depends on the specific lender but here are the basics.
1. All lenders factor in something for vacancies and repairs when calculating your rent income. My lenders count 80% of the rent as income, some lenders only 75%. At 80% a lender would say you’ve got $800 income per month, a $1,000 payment, so you’d have a net loss of $200 per month.
2. Some lenders require a history of rent for a property before they’ll count it as income. Some require a year, some 2 years. The reason for this is to substantiate your claim of $1,000 a month rental income. In other words, what’s to stop you from saying it’s $1,000 a month when it’s really $600?