Residual Income

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DEFINITION of 'Residual Income'

The amount of income that an individual has after all personal debts, including the mortgage, have been paid. This calculation is usually made on a monthly basis, after the monthly bills and debts are paid. Also, when a mortgage has been paid off in its entirety, the income that individual had been putting toward the mortgage becomes residual income.

BREAKING DOWN 'Residual Income'

Residual income is often an important component of securing a loan. The loaning institution usually assesses the amount of residual income an individual has left after paying off other debts each month. If the individual requesting the loan has sufficient residual income to take on additional debt, the loaning institution will be more likely to grant the loan because having an adequate amount of residual income will ensure that the borrower has sufficient funds to make the loan payment each month.

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RELATED FAQS
  1. What is the difference between residual income and passive income?

    Passive income is money that is earned from an enterprise that has little or no ongoing effort involved. Residual income ... Read Full Answer >>
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    Residual income is usually calculated in the context of personal finances, as opposed to operating income, which is calculated ... Read Full Answer >>
  3. Is residual income considered profit?

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  4. What is the difference between residual income and savings?

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    The mobile marketplace is flooded with personal finance apps and tools for household management. Level Money and Personal ... Read Full Answer >>
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