HELOC debt to income ratio calculation and NH lenders

2 Replies

Hi everyone,

I have been owner occupying a duplex (renting out one full unit plus spare bedrooms) in Dover since 2016, get rents totally $3440 monthly, seen great appreciation on the property value, and want to open a HELOC secured with the property.

The complication I am dealing with involves my debt to income ratio and how it is calculated. I can not seem to find any solid guidelines on how I should make the calculation accurately given my situation. For example, it is my understanding that my mortgage taxes and insurance go into the numerator of my DTI ratio; In my case this totally dominates the numerator as I do not have any other significant debts. The complication now comes with calculating the denominator, my income. I have good w-2 employment- that's easy- what about my rental income? Can I include my total gross rental income? Gross from the fully rented unit? Total gross minus expenses? What expenses?

My primary expense is mortgage taxes and insurance, Since that is added to my numerator (debt) wouldn’t it be foolish for it to subtract from my denominator (rental income) as well? 

If anyone can help me straighten out this calculation or recommend any flexible lenders on the NH seacoast it would be greatly appreciated, thank you.

Rent absolutely counts towards income in their DTI calculation. However most institutions I have spoken with over the years will use 70% or your monthly rental income as they deduct for vacancy and expenses. So for your DTI they will multiply your monthly rental income by 0.70 and use that number.

Thank You for your response, do you know if they will take 70% of the income I get from the fully rented unit or 70% from my total rental income (including spare bedrooms)? I have heard elsewhere that "spare bedroom" rent is not included in DTI even if I have leases.

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