Image by Gerd Altmann from Pixabay
For traditional loan programs , many lenders will take 75 % of your gross rents to qualify for a new mortgage loan because the lender assumes that you have vacancies , repairs , and property management fees . For easy math , a rental property with $ 1,000 per month in gross income is underwritten as if it were $ 750 per month and another pricier property with $ 10,000 per month in rental income is analyzed as if it were $ 7,500 per month .
For NONI , on the other hand , you can qualify at 1.0 DSCR ( Debt Service Coverage Ratio ) or breakeven levels . For example , your rental home averages $ 2,000 per month , so your newly proposed mortgage payment ( including property taxes , insurance , and homeowners association fees , if applicable ) must be equal or lower to that same gross rental income . As a result , it ’ s much easier to qualify for a NONI loan product than any other residential mortgage loan that I know of today .
30Year Fixed vs . 10Year InterestOnly
A 30year mortgage payment doesn ' t usually begin to pay down any significant amount of loan principal until after the 7th year . The average mortgage borrower keeps their loan for nearly seven years , so an interestonly loan product can be a much more solid choice today for many borrowers .
Let ' s compare the fully amortizing 30 year fixed payment with a 10year interestonly payment with cashout options to see the difference for the same 3.875 %* rate :
Loan amount : $ 250,000 30year fixed rate payment : $ 1,175.59 / mo . ( principal and interest ) 10year fixed interestonly : $ 807.29 / mo .
Loan amount : $ 500,000 30year fixed rate payment : $ 2,351.19 / mo . ( principal and interest ) 10year fixed interestonly : $ 1,614.58 / mo .
Loan amount : $ 750,000 30year fixed rate payment : $ 3,526.78 / mo . ( principal and interest ) 10year fixed interestonly : $ 2,421.88 / mo .
Loan amount : $ 1,000,000 30year fixed rate payment : $ 4,702.37 / mo . ( principal and interest ) 10year fixed interestonly : $ 3,229.17 / mo .
Loan amount : $ 2,000,000 30year fixed rate payment : $ 9,404.74 / mo . ( principal and interest ) 10year fixed interestonly : $ 6,458.33 / mo .
Loan amount : $ 3,000,000 30year fixed rate payment : $ 14,107.11 / mo . ( principal and interest ) 10year fixed interestonly : $ 9,687.50 / mo .
* APRs from 4.79 %: The 10year fixed loan converts to an adjustable for the remaining 20 or 30 years with 30year and possible 40year loan term options . There are also 30year and 40year fixed interestonly loan programs at higher rates ( ALL rates and programs subject to change .)
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