Residual Income Law and Legal Definition

Residual Income means the balance income that a person has after paying all his/her debts and expenses such as housing costs and taxes. It is any income that is generated through indirect involvement in another action such as writing a book and later receiving a royalty on the sale of each book. The amount paid towards mortgage is generally deducted from the residual income. But once the mortgage is paid off the amount that is paid towards the debt will become part of the residual income. It is the income of the rich. It is a source of income that that goes to the account of a person regularly. Residual income is also called passive income. Rental income, website revenues, royalties, and portfolio dividends are all examples of residual or passive income.

Residual income is essential for securing a loan. Most loaning institutions assess the residual income of an individual who applies for a loan. If the individual requesting the loan has sufficient residual income to take on additional debt, the loaning institution will grant the loan.