To understand how debt service ratios are calculated in Lendesk, check out the following scenarios.
Standard Calculations
Scenario:
Applicant Income
Employment Income - $150,000
Applicant Liability
Other Debt Obligations - $15,000
Subject Property
Mortgage - $40,000
Property Taxes - $3,500
Heating Cost - $1,500
50% Condo Fee - $2,000
Gross Debt Service
Total Debt Service
Income Adjustment Calculations for Rental Addback
1. Rental Income on Subject Property
Scenario:
Applicant Income
Employment Income - $100,000
Subject property rental income - $10,000
Applicant Liability
Other Debt Obligations - $5,000
Subject Property
Mortgage - $25,000
Property Taxes - $5,500
Heating Cost - $2,500
Gross Debt Service
Total Debt Service
2. Rental Income on Asset Property
Scenario:
Applicant Income
Employment Income - $100,000
Asset property rental income - $7,500
Applicant Liability
Other Debt Obligations - $5,000
Subject Property
Mortgage - $25,000
Property Taxes - $5,500
Heating Cost - $2,500
Asset Property
Mortgage - $15,000
Property Taxes - $3,500
Heating Costs - $1,500
Total Debt Service
Income Adjustment Calculations for Rental Offset
1. Rental Income on Subject Property
Scenario:
Applicant Income
Employment Income - $100,000
Subject property rental income - $10,000
Applicant Liability
Other Debt Obligations - $5,000
Subject Property
Mortgage - $25,000
Property Taxes - $5,500
Heating Cost - $2,500
Gross Debt Service
Total Debt Service
2. Rental Income on Asset Property
Scenario:
Applicant Income
Employment Income - $100,000
Subject property rental income - $7,500
Applicant Liability
Other Debt Obligations - $5,000
Subject Property
Mortgage - $25,000
Property Taxes - $5,500
Heating Cost - $2,500
Asset Property
Mortgage - $15,000
Property Taxes - $3,500
Heating Costs - $1,500
Total Debt Service
Rental Income Surplus
When the rental income exceeds the property’s expenses, this will result in an income surplus.
GDS and TDS will not calculate to a negative %; the income surplus will be excluded from the debt service calculations.
1. Subject Property Rental Income Surplus
Scenario:
Applicant Income
Employment Income - $100,000
Subject property rental income - $16,000
Applicant Liability
Other Debt Obligations - $15,000
Subject Property
Mortgage - $8,500
Property Taxes - $2,000
Heating Cost - $1,500
Subject Property - Rental Offset = 80 %
Subject Property Mortgage & Expenses: $8,500 + $2,000 + $1,500 = $12,000
Subject Property Rental Income w/Rental Offset: $16,000 x .80 = $12,800
Surplus = $800 (added to gross income)
Subject Property Rental Income used to offset expenses is $12,000
2. Asset Property Rental Income Surplus
Scenario:
Applicant Income
Employment Income - $100,000
Asset property rental income - $20,000
Applicant Liability
Other Debt Obligations - $5,000
Subject Property
Mortgage - $20,000
Property Taxes - $5,500
Heating Cost - $2,500
Asset Property
Mortgage - $12,000
Property Taxes - $1,800
Heating Cost - $1,200
Asset Property - Rental Offset = 80 %
Asset Property Mortgage & Expenses = $12,000 + $1,800 + $1,200 = $15,000
Asset Property Rental Income w/Rental Offset = $20,000 x .80 = $16,000
Surplus = $1,000 (added to gross income)
Asset Property Rental Income used to offset expenses is $15,000
