Understanding Rental Offset and Choosing the Right Lender for Your Investment Needs

Josh Perez • December 15, 2024

As a mortgage broker, I often hear this question: “Which lender has the best rental offset?” It’s a valid concern for investors, but here’s the truth—it doesn’t really matter.

Let me explain why.

"The best rental offset isn’t necessarily the best lender for your investment needs. It only matters after reviewing your application, documents, property specifics, and what you're hoping to accomplish."

The Best Rental Offset Isn’t Always the Best Option

Imagine this scenario:

  • Lender A uses 100% of rental income for calculations.
  • Lender B uses 50% of rental income.


On the surface, Lender A seems better, right? But here’s the catch:

  • Lender A deducts only the mortgage payment.
  • Lender B, meanwhile, deducts the mortgage payment, property taxes, property management fees, utilities, and insurance.


Now which one works better for you? It depends entirely on the specifics of your situation.


Interest Rates Don’t Tell the Whole Story

Here’s another example:

  • Lender A offers a 5.75% interest rate and verifies rental income based on what you reported on your tax return. They qualify you for a $700,000 mortgage.
  • Lender B offers a 6.5% interest rate but verifies rental income using current leases or market rents from an appraiser. They qualify you for an $850,000 mortgage.


Which lender is better? Again, it depends on your goals, financial profile, and the property specifics.


Tailoring the Strategy to Your Goals

Your investment needs are unique, and the “best” lender depends on what you’re trying to accomplish. Whether it’s:

  • Purchasing your first rental property or your tenth,
  • Refinancing to pull the maximum equity,
  • Setting up a home equity line of credit (HELOC),
  • Minimizing your down payment for the next property,


The right strategy involves a lot more than comparing rental offsets or interest rates. It requires a comprehensive review of your application, documents, and long-term goals.


A Call to My Fellow Mortgage Brokers

Let’s be real: reciting rates and offsets without understanding an investor’s full picture is lazy. It’s not just a disservice to investors—it’s a disservice to the value we, as brokers, are supposed to provide. Every situation is unique, and our role is to guide investors toward the solutions that truly fit their goals and strategies.


Final Thoughts

The “best” rental offset isn’t necessarily the best choice for your investment journey. It’s about aligning your financing with your broader investment goals and ensuring that the lender you choose can support your strategy, whether it’s growing your portfolio or maximizing your returns.


If you’re ready to take your investment plans to the next level, let’s connect. Together, we’ll create a tailored strategy to help you achieve your goals.

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