Using Rental Income to Purchase Your Next Investment

There are 3 categories of rental properties on a mortgage application, each has a distinct way of calculating rental income. The 3 categories are: owner occupied + basement suite, subject property, non-subject property.

• Owner-occupied + Basement Suite Rental – When the property is owner-occupied, lenders typically allow 85%-100% of rental suite income to be added to the buyer’s total income. This additional income will help boost the buyer’s qualifying amounts.
• Subject Property – Lenders generally allow 50% of rental income to be added to the purchaser’s total income when the rental property is the subject property (the property being financed). In some cases market rent appraisals can be used to determine rental income.
  • Buyers purchasing their 3rd property or greater will need to use the bank’s rental worksheet to calculate total income and expenses for all properties.
• Non-Subject Property – Banks allow 50%-80% of rental income to offset the purchaser’s total expenses when the rental income is from the non-subject property (the property not being financed).
  • Banks will allow 50% – 80% of the rental income to be used to offset the rental property’s expenses when the purchaser is buying/refinancing their “owner-occupied” property.
  • Buyers purchasing their 3rd property or greater will need to use the bank’s rental worksheet to calculate total income and expenses for all properties.

This is a simplified overview for determining how much rental income can be used in the mortgage application. Each lender has their own nuances within these categories.

To learn more about which lender is best for you, please contact me at 778-215-4121 or by email: adamsale@dominionlending.ca

Best,

Adam Sale