What percentage deduction is taken for vacancy and maintenance when using rental income?

When evaluating rental income for the purpose of qualifying for a mortgage, it is common practice to account for potential vacancies and necessary maintenance. The standard deduction for vacancy and maintenance is typically set at 25% of the gross rental income. This deduction is established to provide a cushion against unexpected financial fluctuations that can arise from periods when a property may not be generating income or may require repairs.

By taking a 25% deduction, lenders ensure a more conservative assessment of the actual income that a borrower can reliably expect to receive. This cautious approach helps safeguard against overestimating the borrower's capacity to repay the loan. Factors like tenant turnover, property upkeep, and unforeseen vacancies all contribute to the risks associated with rental properties, thus justifying this deduction amount.

The other percentages mentioned do not align with established practices typically used in the mortgage qualification process, as 10%, 20%, and 30% are less standard. Therefore, the choice of a 25% deduction reflects an industry norm that appropriately balances risk and potential rental income stability.