Rental Offset

Rental offset refers to the portion of rental income a lender permits a borrower to subtract from their housing costs.

The bigger the percentage, the easier it is to qualify for a mortgage. Rental offsets are usually 50-80%, but a small number of lenders allow up to 100% on uninsured mortgages.

Here’s how rental offset is used when calculating a borrower’s total debt service (TDS) ratio:

( PITH + Other Debts – ( Rental Offset x Rental Income ) ) / Borrower Income

PITH  =  Principal, interest, property taxes, heat, and 1/2 of condo fees.

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