I am banging my head into a wayll when trying to get a HELOC on one of my rental properties. :banghead
Can someone confirm the property way to calculate debit to income.
Using some sample numbers
Regular Jobs salary - $8,000 per month
Mortgage on Personal Residence - $3,000 per month
No Other personal debit
Rental Property Make $10,000 per month
Mortate On rental property is $5,000(includes taxes/insurance/principle/interest)
Bank mentions that they discount rent 75% for vacancy allowance.
Method A
Take 75% of rent or $7,500 and subtract $5,000 mortgage leaving me a net profit of $2,500
Add the $2,500 profit to my $8,000 a month giving me total net income of $10,500
$3,000/$10,500 = 28%
Method B
Take $8000 Salary and add $7500(75% of rental income) to get = $15,000 Income
Take $3,000(mortgage on personal residence) + $5000 (mortgage on investment property) and get $8,000 in debit
$8,000/$15,000 and get a debit to income of 53%