When you are buying an investment property and you’re looking for a mortgage it’s important to know whether or not lenders will take rental income into account. Rental income if taken into account, can add to your serviceability of that property significantly.
You’re renting a property for $400 or $500 per week then you’re looking at about $25,000/year that you are adding in serviceability if the lender will take that into account.
So will lenders take rental income into account? The answer is yes, some lenders will take rental income into account.
I’m sure there are some lenders out there who won’t touch it and who won’t take it into account but in most circumstances lenders will take a portion of rental income into account.
Taking Rental Yield Into Account
There’s one lender at the moment (Bankwest) who don’t take rental income into account, they take rental yield into account. So that will just give you an average rental yield of maybe 3 or 4 %, something pretty low and they’ll just say “we don’t care what the property is renting for we’re going to say it’s going to for the 3 % yield and here is what will allocate to you.
They do that but most other people will look at the rent and will take either a portion or the full amount. So there is lenders who take maybe 75 or 80 % of the rental income but there are some lenders out there who would take a 100 % of the rental income.
If you’re struggling with a borrowing capacity then maybe going with the lender who takes all that rental income into account might mean that you can borrow more money. I do suggest that you always go and speak to your mortgage broker about this because he will have access to all the lenders, they know all the criteria and they can help you out.
In the coming days I’ve interviewed a couple of mortgage brokers from my local area Brad and Don, and we’re going to be learning from them more about getting a mortgage, increasing your borrowing capacity and about different types of loans. Look out for that, it is coming down the pipeline very shortly.
So will lenders take rental income into account? The answer in most cases is yes and that means going to see a mortgage broker to find out which one works for you.