The banks are making it easier for first home buyers to qualify for a mortgage of up to 95% of the property value.
Despite this, younger home buyers still face many hurdles when trying to get approval.
This is generally because they don’t have the savings or financial stability that older borrowers have, and as a result, the banks doubt their ability to repay their mortgage.
Although the fact that they have little savings is no indication of their lack of financial commitment, in most cases they have not been able to save because they have been paying rent.
Luckily, there are some lenders that will accept a rental payment history in lieu of savings.
What are the qualifying criteria?
- You must have a rental history of at least three months (previously 12 months).
- Your rental repayments should be at least 50% of the proposed home loan repayments.
- You must be paying your rent and your bills on time.
- You must be renting via a licensed real estate agent.
- You still need 5% as a deposit, it just doesn’t need to be saved over a three month period. It can come from a gift, inheritance, cash, shares, bonus from work, term deposit or equity in another property.
The lease should be in your name alone or both you and your partner. You may still qualify if you are renting with other people, as long as you can prove a track record of prompt rent repayment via your bank account statements and your name is listed on the tenancy agreement.
If you meet the above criteria then we may be able to get your loan approved using rent instead of genuine savings!
What are the exceptions to these guidelines?
In some cases your 5% deposit will still need to be held in your account for at least three months even though you have a three month rental history.
If your deposit comes from the sale of an asset such as a car then you will need to hold the funds for three months to qualify with this lender. Note that some other lenders can still consider this deposit source if you have been renting for longer than three months.
Your first home owners grant will not be considered as part of your 5% deposit by this lender. You cannot borrow a deposit from someone else or obtain a personal loan to use as a deposit.
Your loan will have to meet more stringent lending criteria as Lenders Mortgage Insurance (LMI) approval may be required. This means that your credit history will need to be clear of defaults, your employment must be stable and you must not have significant amounts of unsecured debt such as credit cards and personal loans.
Can I use private rent as genuine savings
Many people who rent privately are unable to use their rental payments as evidence of genuine savings. Thankfully we now have a lender that can help you if you are in this situation.
You must have been renting for more than six months, you must have a formal tenancy agreement and you must be able to prove your rental payments via bank statements. If you can show these documents then we can get you a mortgage!
Do you qualify?
Genuine savings is one of the most complicated areas of lending policy with many hidden catches and grey areas. Please use our genuine savings calculator to find out how the banks will assess your deposit and if you will qualify for a home loan.
Please read our page for more information about mortgages that do not require any proof of genuine savings.
If you need our help to get your loan approved then please call us on 1300 889 743 or enquire online and one of our mortgage brokers can determine which lenders you will qualify with.