Rent Free Properties

Hi Sagarthakar,

Welcome to the forum.

If a renter has been living in the property by paying a rental amount which is considerably below the fair market value, then it may be treated as a reduction in the mortgage. This concept is known as rent free property.

According to me a rent free property is one where the borrower is staying in a residence and not paying mortgage for it. Say for eg, he is living with his sister or with his gf, where the gf is paying the rent. In such cases the borrower cannot verify his rental payments as he is not paying rents in the first place. Thats why there is a LTV reduction from the lenders as this adds to the risk.

Ravi

Sagar,

Please clarify.

Are you talking about an Owner occupied property or Investment

When a first time homebuyer is buying a new home they can get a rent free letter from there parents stating they lived with them until now.

On investment properties lenders like to see rental agreements. If you as an investor can show that the property is already rented for an amount then that is better for them. If it will be vacant then that is more risk to them. Just depends on the situation and the Investor personally.

Give me some more information and I will try to answer your other questions.

Hello Eric ( livinginnky )

Thanks for your reply, I came across a loan program where the lender has directly given 10% reduction in LTV/CLTV if the property is a Rent Free Property.

No specification is made by him whether its a Primary Resi / Second Home or Investment Prop.

I wanted to know more in deep about this " RENT FREE " funda is it that if any person is living in a property and paying Rent and if in due course he tends to buy the same property !!! or rather how does this entire calculation goes on ...

Please can u help me out.

Regards

Sagar

Hi Sagar,

In which type of loan program, have you found out the 10% LTV reduction? I am not aware of any such reduction in rent-free property.