How is rental income counted when I borrow for an investment property?
Lenders shade rental income, usually to eighty per cent of the gross figure, to allow for vacancy, management fees and maintenance. A property renting for $700 a week is counted as about $29,000 a year, not $36,400. Proposed rent on a purchase is usually supported by a rental appraisal or the valuer's estimate.
Some lenders also add back part of the tax benefit of negative gearing, which helps higher-income investors. Against that, investor and interest-only loans are priced above owner-occupier rates and are assessed with the same three per cent buffer, so a $600,000 investment loan is assessed at nine per cent or more.
If you already own a home, the deposit for an investment property usually comes from equity rather than cash, either as a separate loan against your home or by cross-securing both properties. There are good reasons to prefer the first. Borrowable's investment check works through the equity and the rent and shows how the numbers land.
Want the number for your situation? The investment property check asks the same questions Joshua would and shows the working.
Run the investment property check