Rental income is the monthly fee that a homeowner charges an individual (tenant) for occupying space in their property.
For instance, if you are planning to rent out: a basement in your new home, the entire house or condo. Unfortunately, renting out a bedroom in a house or room condo does not meet these conditions.
The offset is the percentage of the rental income that the lender will use to reduce expenses, such as property taxes, heat, and of condo fees in order to determine your max loan amount.
Rental income can only be used when renting out a legal suite.
We've collaborated with lenders and some of the top brokers in the industry to provide you with the two options available for adding rental income to the gross income:
Option 1: Add back
This option lets you use a percentage (offset) of the rental income. The offset is then added to your gross annual income just before calculating the maximum mortgage.
Option 2: Reduce & Add
This option is slightly better and it will reduce expenses such as property taxes, heat and condo fees. Then if anything remains, a percentage (offset) of the rental income is added to your gross annual income before calculating the maximum mortgage.
To accommodate for all the rules, we've added a brand new menu in the Stress Test Calculator as well as the GDS/TDS calculator. Including, a quick status and menu access button right on the keyboard toolbar itself.
You can access this menu from the options button near the top right corner of the tools.