Residual Income In Pakistan for Dummies

Passive income is money that is earned from an enterprise which has no ongoing effort involved. Residual income is not actually a type of income, but instead a calculation which determines how much discretionary money an individual has available to spend after most monthly bills are paid.

One example of passive income is the profit realized from a rental property that is owned by investors that are not actively involved in managing the house. Another illustration is a dividend-producing inventory that pays an annual percentage. While an investor should purchase the stock to realize the passive income, no other effort is required. .

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Residual income is a number that banks often compute when determining whether applicants can manage a mortgage. To compute residual income, the bank determines the applicant's income, and then subtracts the anticipated mortgage, property insurance and taxation. Any monthly payments made to credit cards, installment accounts or student loans are also subtracted from income.

The amount that's left after the subtractions are done is considered residual income. .

Banks compare an applicant's residual income into the price of living in a particular area to determine if the individual's budget is too tight to handle a mortgage. For instance, an applicant who resides in the South and has a family of four must have a residual income of at least $1,003 per month if he wishes to take a loan backed by the Veteran's Administration. .

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