Anybody familiar with the calculations that lenders use in order to grant mortgage approval based on clients own income and rental relief for the purchase of an investment property?
The repayment cover calcutation is usually 1.25x times cover (ie rental / repay). However as most rentals dont cover repays and most investment properties are now interest only, its usually now accepted at 1.25x cover on interest basis. In terms of support from personal income (if required) theres no hard and fast rule and banks are now working from available income up (rather than the previous salary multiple rule) the rule of thumb is 1/3 your income on repays only.
The repayment cover calcutation is usually 1.25x times cover (ie rental / repay). However as most rentals dont cover repays and most investment properties are now interest only, its usually now accepted at 1.25x cover on interest basis.
Some lenders work on this basis while others offset 70% - 80% of the projected rental against the new (stress tested) mortgage repayment. They will also factor in your earned income (35% - 45%) as well as any financial commitments, current mortgage repayments etc.