Planning to rent out a basement suite in your home? Can you use that rental income to qualify for a mortgage? Let me explain how that process works!
Today I want to talk about using rental income to help you qualify for a mortgage. So, a lot of people want to buy a property that has a basement suite, and you rent out the suite and that helps you pay for your house. Let’s say you could rent a place for $1,000 a month for your suite. You would think you might be able to use $1,000 to help you qualify. That’s not the case though. First off, if that basement suite is not recognized as a legal suite by the municipality, lenders are not going to let you use it in terms of generating income. Now the fact that, after you buy the house and you decide to rent it out, that’s a bonus for you but doesn’t help you in terms of qualifying for the mortgage. What would help you qualify is if the suite is legal, then we either get a lease or something called a market rent letter. A market rent letter is an appraiser’s, a real estate appraiser’s, opinion of what the property or that suite might rent for. And typically you’ll be able to use 50% of that market rent to help you qualify for the mortgage.
The other thing to consider is, let’s say you’re turning your existing home into a rental property and buying a new home. You can still use the rental income from your old house to qualify. Again, we’re going to need a market rent letter. In a situation like that, different lenders will have different ways of treating the rental income. The most conservative way is using 50% of that rent. There are a couple of other ways of doing it that are a little fancy and arguably gets you more income for qualifying. So, it’s a really good reason why you want to use a mortgage broker because the fact that different lenders will have different policies around rents. Talk to me for more information!
About Jason Scott, Edmonton Mortgage Broker
Looking for a personalized mortgage solution? As an Edmonton Mortgage Associate, I’ll be your trusted partner who will help you get the right mortgage for your family home or Investment property. I’m Jason Scott, and I’ll be your Mortgage Broker Edmonton.
