Mortgage Calculator With Rental Income

Mortgage Payment Formula:

\[ \text{Loan Payment} = \frac{P \times r}{1 - (1 + r)^{-n}} \] \[ \text{Income} = 75\% \times \text{Gross Rent} \]

Loan Principal (P):

USD

Annual Interest Rate:

Loan Term:

years

Gross Rental Income:

USD/month

Monthly Loan Payment:

Qualifying Income (75% of Gross Rent):

Unit Converter ▲

Unit Converter ▼

From:	To:

1. What is the Mortgage Calculator With Rental Income?

This calculator helps property investors determine their mortgage payments and how rental income affects their loan qualification. It implements Fannie Mae's 75% rule where only 75% of gross rental income can be counted as qualifying income.

2. How Does the Calculator Work?

The calculator uses two key formulas:

\[ \text{Loan Payment} = \frac{P \times r}{1 - (1 + r)^{-n}} \] \[ \text{Income} = 75\% \times \text{Gross Rent} \]

Where:

\( P \) — Loan principal amount (USD)
\( r \) — Monthly interest rate (annual rate ÷ 12)
\( n \) — Total number of payments (loan term in years × 12)
Gross Rent — Total monthly rental income
75% — Fannie Mae's standard adjustment factor for rental income

Explanation: The mortgage payment formula calculates the fixed monthly payment, while the income formula shows how much of your rental income can be used to qualify for the loan.

3. Importance of Rental Income in Mortgage Qualification

Details: Lenders typically only count 75% of gross rental income to account for vacancies and expenses. This calculator helps investors understand how rental properties affect their debt-to-income ratios.

4. Using the Calculator

Tips: Enter the loan amount, interest rate, loan term, and expected monthly rental income. The calculator will show your monthly payment and how much income can be counted toward qualification.

5. Frequently Asked Questions (FAQ)

Q1: Why only 75% of rental income?
A: Lenders use this conservative approach to account for potential vacancies and maintenance costs.

Q2: Can I use 100% of rental income if I have long-term leases?
A: Most conventional loans use 75% regardless, though some portfolio lenders may consider higher percentages.

Q3: How does this affect my debt-to-income ratio?
A: The qualifying income (75% of rent) is added to your other income, while the mortgage payment is added to your debts.

Q4: Are there different rules for multi-unit properties?
A: For 2-4 unit primary residences, you may be able to use higher percentages of the rental income from additional units.

Q5: Does this include property taxes and insurance?
A: This calculator shows principal and interest only. For a complete payment estimate, you'd need to add taxes and insurance.