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Rental Income And Mortgage Approval

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  • 09-03-2016 6:18pm
    #1
    SteeveeDee
    Registered Users Posts: 103 ✭✭


    Hey,

    I was hoping someone could help me with this. I am looking to buy a property and I currently own a property let out to students which yields a definite rent of €8000 per student year and around €3000 on average through holiday rental in the off season. I own the property outright and I have never had a mortgage for any property so technically I will be treated as a first time buyer.

    My question is will my bank include any of my rental income in calculating my mortgage approval? Will it be included in my gross annual income? I receive a relatively hefty bonus yearly however my last dealing with the bank indicated this is not taken into account whatsoever.

    Thanks


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    #2
    MarkAnthony
    Closed Accounts Posts: 6,934 ✭✭✭MarkAnthony


    If the income is properly documented in your accounts then if will be taken into account.

    Bonuses depend from bank to bank.


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    #3
    SteeveeDee
    Registered Users Posts: 103 ✭✭SteeveeDee


    Yes, it is paid via direct debit and everything is above board. Thanks for the reply Mark. Any suggestions on a bank that may take all my income into account including bonuses etc.?

    Thanks


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    #4
    Gumbo
    Moderators, Society & Culture Moderators Posts: 39,407 Mod ✭✭✭✭Gumbo


    Some banks allow rental income and allow 75% of it or 80% of it depending on the bank. I don't know any bank that allow 100% of it.


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    #5
    MarkAnthony
    Closed Accounts Posts: 6,934 ✭✭✭MarkAnthony


    TBH you should try multiple banks anyway but KBC too some of mine into account.

    My suggestion is not to over stretch yourself though. If you've a low interest rate and approval use the bonus to pay off the mortgage early/create equity and trade up if needed.


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    #6
    Squall Leonhart
    Closed Accounts Posts: 1,794 ✭✭✭Squall Leonhart


    I'd be thinking a bonus is subject to change and not guaranteed income & this is why the banks will not take it into account? It's not part of your salary, your bonus is just that, a bonus.


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    #7
    mel123
    Registered Users Posts: 2,209 ✭✭✭mel123


    I was in the same situation as yourself re the house and rental income. First off went to BOI and point blank refused to take the rental income into consideration. They actually suggested to me why dont I live in that house and why did I want a mortgage. Rolling my eyes here as I type.
    Then I went through a broker and I got slightly over the CB rules of what in black and white I should have been 'allowed' borrow but i think that may have been more a good bank account/saving/paying rents etc, but it wasnt much.
    Apparently the banks dont take a property into account when deciding how much they will approve you for, for two reasons I was told. One was you could immediately sell this house, and have no more rental income and two, you could have no one to rent it out for large periods of time (doesnt seem likely now, but you never know what way the rental market will go down the line).


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    #8
    Gumbo
    Moderators, Society & Culture Moderators Posts: 39,407 Mod ✭✭✭✭Gumbo


    mel123 wrote: »
    Apparently the banks dont take a property into account when deciding how much they will approve you for, for two reasons I was told.
    mel123 wrote: »
    One was you could immediately sell this house, and have no more rental income

    That's actually a good thing for the bank. If you sell the rental property then you have less risk associated with your loan and the rental income is not required anymore as you are now only servicing your remaining mortgage.
    mel123 wrote: »
    two, you could have no one to rent it out for large periods of time (doesnt seem likely now, but you never know what way the rental market will go down the line).

    That is why some banks only account for 75%, to allow for dead periods or rental reductions.


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    #9
    mel123
    Registered Users Posts: 2,209 ✭✭✭mel123


    kceire wrote: »
    That's actually a good thing for the bank. If you sell the rental property then you have less risk associated with your loan and the rental income is not required anymore as you are now only servicing your remaining mortgage.

    Sorry i meant if say your earnings allowed you to borrow 100k, but because you have a house they let you borrow 200k based on rental (picking numbers out of thin air), and then you sell the house, they are screwed because you 'probably' wouldnt be able to afford the mortgage any longer as you dont have the rental income (and assuming the money from the sale is going into a black hole for arguments sake)


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    #10
    Gumbo
    Moderators, Society & Culture Moderators Posts: 39,407 Mod ✭✭✭✭Gumbo


    mel123 wrote: »
    Sorry i meant if say your earnings allowed you to borrow 100k, but because you have a house they let you borrow 200k based on rental (picking numbers out of thin air), and then you sell the house, they are screwed because you 'probably' wouldnt be able to afford the mortgage any longer as you dont have the rental income (and assuming the money from the sale is going into a black hole for arguments sake)

    The rental income will be considered to service the mortgage on the other property. Earnings plus rental income minus rental mortgage = what you can borrow.


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