Rental income when applying for a mortgage

[milliethemil]

Does anyone know what criteria banks use when reviewing mortgage applications where the applicant already has an existing property that is rented out ? It is unclear to me if they considet the rental income as I have seen some posts where they do and some where they don't...

 

[LDFerguson]

Each bank has its own criteria.

A common one for rental income is to discount the rent to account for possible gaps between tenancies, expenses, tax etc. So if the actual rental income is €1,000 per month, a bank might take €750 per month into their calculations.

In addition, many banks will "stress-test" the mortgage repayments on the rented property. So even if you're actually paying interest-only at 3%, the bank will calculate what the repayments on a capital-and-interest mortgage at 5% would be.

 

[milliethemil]

Each bank has its own criteria.

A common one for rental income is to discount the rent to account for possible gaps between tenancies, expenses, tax etc. So if the actual rental income is €1,000 per month, a bank might take €750 per month into their calculations.

In addition, many banks will "stress-test" the mortgage repayments on the rented property. So even if you're actually paying interest-only at 3%, the bank will calculate what the repayments on a capital-and-interest mortgage at 5% would be.

Thanks, do you by any chance know which banks take rental income into account and does your property have to be let for a specific number of months in order for them to consider it?

 

[44brendan]

All banks will take a discounted rental income into account in calculating repayment capacity. As per previous post, they will also account for existing loan repayments at sensitised rate. Usually a bank will check your statement to verify rent payments. There is o set period for you to have the property rented and RI is discounted to allow for future vacancies. However, the Bank would generally like to see rent receipts over a minimum 6 month period.