This Weeks Rates:
Insured:
- 5-year fixed: Starting at 3.79%
- Variable: Starting at 3.44%
Insurable:
- 5-year fixed: Starting at 3.89%
- Variable: Starting at 3.65%
Conventional:
- 5-year fixed: Starting at 4.09%
- Variable: Starting at 3.85%
CMB:
- 5-Year: 3.12%
- 10-Year: 3.68%
If your investor clients have been told their debt ratios are too high, a rental worksheet could be the solution they have never heard of. In this episode, Scott Dillingham explains how certain lenders allow 80-100% of rental income in their calculations — instead of the standard 50% — potentially qualifying clients for hundreds of thousands more.
Scott breaks down the math with a clear example: if you rent a property for $3,000 per month with basic expenses of $2,200, you might assume you have $800 in monthly cash flow. However, when lenders apply the 50% rental income rule, they only count $1,500 of that rent, showing a loss of $700 on paper despite the property generating real profit. This discrepancy between actual cash flow and calculated income is what causes many investors to hit artificial walls in their mortgage applications.
The rental worksheet solution changes everything for portfolio investors. Rather than using the standard 50% add-back method, specialized lenders with rental worksheets can use closer to 100% of rental income in their calculations. The worksheet compiles all properties in an investor's portfolio, calculating the true surplus or deficit across the entire portfolio. When there is positive surplus income, it gets added to the borrower's regular employment income, significantly boosting qualification amounts.
Scott shares a real client example where the rental worksheet approach made all the difference. This client was easily approved for a mortgage through LendCity's specialized program but was subsequently declined for a simple credit card because the credit card company used traditional debt ratio calculations. This demonstrates how powerful the rental worksheet approach can be compared to standard underwriting methods used by most financial institutions.
Not all lenders offer rental worksheets, and those that do each have their own proprietary formulas and expense calculations. Some lenders will use more favourable calculations than others, which is why working with a mortgage broker who specializes in investment property financing matters. A broker experienced in rental property mortgages can match investors with the lender whose worksheet provides the best qualification outcome for their specific portfolio.
For realtors working with investor clients, understanding the difference between standard rental income calculations and rental worksheet programs is essential. When clients come to you frustrated because they have been told their debt ratios are too high or they have too many properties, connecting them with the right mortgage professional can turn a dead deal into a closing. LendCity Mortgages specializes in investment property financing and has access to multiple lenders with rental worksheet programs designed specifically for portfolio investors.
Key Takeaways
- 50% Rental Income Rule Creates False Shortfalls: Most lenders only count half of your rental income when qualifying for mortgages, which can show paper losses even on profitable properties and artificially limit borrowing capacity.
- Rental Worksheets Use Up to 100% of Rental Income: Specialized lenders with rental worksheet programs can calculate your true portfolio performance, adding surplus income directly to your qualification and dramatically increasing purchasing power.
- Each Lender Has Different Worksheet Formulas: Not all rental worksheets are created equal, and different lenders apply their own expense calculations and income percentages, making lender selection critical for optimal qualification.
- Bank Property Limits Can Be Bypassed: Many banks cap investors at five financed properties, but mortgage brokers can access lenders with higher limits and more favourable rental income treatment for portfolio investors.
- Debt Ratios Are Not the Final Answer: Being told your debt service ratios are too high does not mean you cannot qualify. The right lender and the right calculation method can completely change your approval outcome.
- Investment Property Specialists Make the Difference: Working with a mortgage professional who focuses on real estate investor financing ensures access to programs and lenders that general mortgage agents may not utilize.
Links to Show References
- LendCity Mortgages (Investment Property Financing): lendcity.ca
- Current Mortgage Rates and Pre-Approval: Available in show notes below episode
- Contact LendCity for Rental Worksheet Analysis: Visit website or call for consultation
- (00:00) - – Introduction to Rental Worksheets for Investors
- (00:56) - – The 50% Rental Income Rule Explained
- (01:56) - – Real Client Example: Mortgage Approved, Credit Card Declined
- (02:50) - – How Rental Worksheets Calculate True Portfolio Income
- (03:52) - – Why Different Lenders Have Different Worksheet Formulas
- (05:05) - – LendCity's Investment Property Specialization
- (05:45) - – How to Partner with LendCity for Investor Clients
Show Resources:
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