Using rental history as genuine savings

Any general questions you might have in regards to loans and finance.
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Nicki
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Using rental history as genuine savings

Postby Nicki » Wed Jul 16, 2014 11:12 am

Hi there, I currently rent a flat and pay $400 a week. I live in Neils Road, Adelaide Park and I am thinking about buying a house nearby. I have looked at one property worth $550,000 and I would need to borrow at least $500,000 to complete the purchase. My friend was telling me that I can show the rent as my savings when applying for a home loan. Is this possible? Also, what amount of loan can I expect to receive in this situation?

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Otto Dargan
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Re: Using rental history as genuine savings

Postby Otto Dargan » Wed Jul 16, 2014 12:12 pm

Hi and welcome to the forums Nicki,

You are usually required to show at least 5% of the property value in genuine savings to qualify for a home loan.
This specially applies when you need to borrow up to 80% or more of the property value. What this means is that the money which amounts to 5% of the purchase price must have been held in your savings account for a specified period.

There are some lenders who may be willing to accept the weekly rent you pay as genuine savings. In addition, other types of genuine savings such as cash from the sale of your car, an inheritance, or a bonus from work may also be accepted by one of our lenders if you have been renting for at least three months.

You may be able to borrow up to 95% of the property value with a rental payment history. Although you would still need a deposit to buy the house, the money could come from any other source if you meet the genuine savings requirement.

Cheers,
Otto
Otto Dargan
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Nicki
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Re: Using rental history as genuine savings

Postby Nicki » Wed Jul 16, 2014 1:00 pm

What else is usually considered as genuine savings by the banks?

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Otto Dargan
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Re: Using rental history as genuine savings

Postby Otto Dargan » Wed Jul 16, 2014 2:00 pm

Hi Nicki,

Although most lenders tend to have their own guideline as to what is and what isn’t considered as genuine savings, the following can generally be accepted as genuine savings:
  • The money saved in your bank account over the last three months.
  • The money held in a term deposit for over three months.
  • Equity held in an existing property (accepted by only some lenders).
  • If you have received any proceeds from the sale of a property (accepted by only some lenders).
  • Shares or managed funds held for three months.
To see whether you are able to refrain from spending the money or not, some lenders may ask you to hold the funds for a total of six months instead of three months. While others may require your savings to increase over time.

You can use the Genuine Savings Calculator as a guide to find out how much genuine savings you may require for your home loan. You can find out how your deposit will be assessed by the lenders and whether or not you are able to meet their genuine savings requirements with the help of this calculator.

You should however keep in mind that each lender and mortgage insurer may have their own policies and definition of genuine savings. As a result, the actual figures may differ.

If you would like to know more about these then you can check out our website. We can also be reached on 1300 889 743 or you can fill in our free assessment form to see if you qualify for a loan or not.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

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Nicki
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Re: Using rental history as genuine savings

Postby Nicki » Wed Jul 16, 2014 3:00 pm

Okay, I will leave my details on the assessment form and try my luck with the calculator :)

moodyjack
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Re: Using rental history as genuine savings

Postby moodyjack » Fri Dec 05, 2014 12:00 pm

Hi there, I am in the process of purchasing a house in Darwin and I need a loan to complete this process. I was wondering if I could use the $25,000 gifted by my parents as a deposit on the house. Will this be considered as a genuine savings by the lenders or will I need to show money from other source in my account to qualify for a home loan?

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Otto Dargan
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Re: Using rental history as genuine savings

Postby Otto Dargan » Fri Dec 05, 2014 2:00 pm

Hi moodyjack,

Most lenders are usually strict about genuine savings however there are some lenders who under certain circumstances may be willing to accept the money gifted by your parents. In such, you can apply for a no genuine savings loan.

You would need to provide evidence that the money is a gift from your parents. To prove this, you need to show a letter from your parents. The letter must be signed by your parents and it should confirm the fact that the gift is non-refundable which does not need to be paid back.

Some lenders may even have additional requirements such as the completion of a statutory declaration form or verify that you have the funds in the account. The requirement can basically depend on which lender you choose to apply with.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

moodyjack
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Re: Using rental history as genuine savings

Postby moodyjack » Fri Dec 05, 2014 4:12 pm

It seems like the chances of approval increases by applying with the right lender and I think you guys would be the right people to help me choose one. So expect a call from me in the few days to discuss about this. And thanks for your answer! :)


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