Could My Rental History Help Me Qualify for a Home Loan?
Saving for a house deposit while renting can feel impossible. Whether you are wanting to buy your first home or an investment property, paying rent every week doesn’t always leave much for you to build up enough genuine savings for a full deposit. For many hopeful home buyers, there is good news! You may be able to use your rental history as part of your home loan application. Read on to find out more about getting home loan approval based on your ability to pay your rent, even if you don’t have a full deposit saved in the bank.
What is a “good” rental history? And how is it used to get your loan approved?
If you have been paying rent on time every payment cycle and are not in arrears, there’s a good chance an experienced mortgage broker can help you find a lender who will accept your rental history to support your application.
Some lenders will want to see a solid 12 months rental ledger and others may except 6 months or 3 months’s rental history with conditions.
A solid rental history is important as it will show your lender you have the ability to afford regular home loan repayments. It all comes together under your borrowing power to make sure that your current rent that you pay as well as any savings you are making are equal to or very similar to your new home loan repayments. This way your lifestyle and level of commitments will not be impacted significantly after settlement. It is another way a lender can look at your situation to get your loan approved. But there are only a few lenders who play in this space.
How will my rental history affect my borrowing power?
Your consistent rental payments, and how much rent you pay each week, can positively affect your borrowing power. With the help of a professional mortgage broker, you can put a solid home loan application together that includes any genuine savings you do have paired with your rental history. Mortgage brokers have access to a range of lenders and can help match you with the right one for your circumstances.
Depending on how much rental history you have available, you could be eligible for a 95-97% home loan (inclusive on Lenders Mortgage Insurance). Talking to a mortgage broker will put you in the best position to know how much you can borrow for your personal circumstances to give you confidence to make realistic offers on properties. Gaining pre-approval for your finance allows you to understand exactly how much money your lender will approve for you to borrow for your mortgage.
Will having housemates or a private landlord affect my rental history?
Typically, to qualify your rent as genuine savings for your mortgage approval, you need to be able to show consistent and prompt rental payments, with no arrears to your name. You can get a rental ledger from your real estate agent to include in your home loan application. But, what if you live in a sharehouse where you only pay some of the rent or you have a private landlord?
In a shared living arrangement, you will need your name on the lease and be able to show a good track record of your rental payments – you can usually use your personal bank statement as proof of your share of rental payment.
If you live in a private rental, you will likely need a formal tenancy agreement in place and rental history proof of more than six months using your bank statements.
What else can help me qualify for a home loan?
Even with rental history proof, it is a good idea to show proof of cash savings for good money management. Along with the proof you can manage paying consistent rental expenses, some lenders will also count the following financial support towards home loan approval.
- Financial gift from your parents with a signed letter explaining it is a gift that does not need to be repaid.
- Financial loan from parents that will be repaid (the lender will treat this differently to a gift).
- Guarantor loan where your parents use equity in their home to provide extra security for your mortgage.
All of these options need to be carefully considered for you to get a hassle-free home loan approval. Contact us today and let our experienced mortgage specialists help you put together a solid home loan application with the right lender for you.