Usually the banks use your monthly/weekly gross salary to determine your maximum loan amount. In some cases you might receive rental income from another property or a flat. Each bank has their own criteria and method to calculate the rental income when evaluating your application, so there is no definitive answer in this case, but I will try to explain the trend below.
The banks will rarely use the full rental income since there is always a risk that the property being rented out might be vacant for a period of time. To reduce this risk, only a certain percentage of this rental income is used in the calculation and this percentage varies between the banks.
Should you be purchasing a new property for investment purposes and to obtain rental income from these (buy-to-let properties), this would be referred to as Future rental income, which is usually not included at all, or only a very small percentage of the possible rental income might be used. In this case a percentage of the actual purchase price might be used since there is no record or proof of the rental income on your bank statements.
To conclude, if you already earn rental income, be sure to include this when applying for a home loan. Even though the full amount will not be used, at least this still improves your chances of obtaining a home loan.
If you are buying property to lease, but do not yet receive the rental income, this Future rental income will not count towards your total income and will not be used in the review of your application.
Disclaimer: The information provided above is not set in stone, and the lenders change their lending criteria and requirements often. Be sure to discuss this with your bond consultant when you apply for your home loan.
