Rent As Genuine Savings
Why not let your rental history work for you?
Trying to get out of the rental rate race and into the property market can be really tough when you need to save a 5% deposit just to qualify for a home loan.
By choosing a lender that accepts rent as genuine savings, you can actually prove your ability or “capacity” to make mortgage repayments with your rental repayments instead of your own regular savings.
You still need a deposit but the great thing is that you can actually use other deposit sources such as a gifted deposit from your parents, inheritance or sales proceeds from a non-real estate asset.
How much can I borrow?
The maximum amount you can borrow or the Loan to Value Ratio (LVR) will vary depending on how long you’ve been renting.
As a general rule:
- 12 months rental history: Borrow up to 97% of the purchase price (LVR) inclusive of Lenders Mortgage Insurance (LMI).
- 6 months rental history: Borrow up to 95% LVR.
- 3 months rental history: A policy exception that allows you to borrow up to 95% LVR.
Call us 1300 889 743 or complete our free assessment form and we can let you know if you qualify for a rent as genuine savings home loan.
How does it work?
Some lenders will accept rent in lieu of genuine savings because your ability to pay rent on a fortnightly or monthly basis is reflective of your ability to meet your mortgage repayments.
In fact, it’s fair to say that when property prices are high, particularly in metro locations, you may well be paying more in rent than you would be in mortgage repayments on a typical loan amount.
This is the reason why some lenders are willing to accept this form of genuine savings.
How do I qualify?
Rental ledger from your real estate agent
In order to qualify for a rent as genuine savings mortgage, you need to show with a rental ledger from a licenced real estate agent that shows you’ve been making your rental repayments in full and on time for at least 12, 6 or even 3 months.
You can find a rent ledger or rental reference letter template on our website which you can provide to your property manager to complete.
A 5% deposit
As long as you can show that you’ve been paying rent on time and in full for a minimum of 3 months, some lenders will accept the following as part of your deposit:
- Gifted deposit from your parents: The gift needs to be in your account and you need to also provide a signed gift letter from parents explaining that the gift is non-refundable.
- Bonus/dividend/commission income: All you need to provide is a payslip and bank statement evidencing the payment/s.
- Inheritance: Provide a letter from the Executor confirming the amount and date that the funds will be received.
- Sale of a non-real estate asset: This can include the sale of car, furniture, artwork or other items. You just need to provide evidence confirming the details of the asset that you sold.
- Tax Refund: Simply provide a copy of your Notice of Assessment showing the tax refund amount.
- First Home Owners Grant (FHOG): As long as you qualify for FHOG in your state, banks will accept this as part of your deposit.
- Personal loan: This is a policy exception with some lenders.
Strong financial position
That means your credit file should be clear of defaults, you need stable employment, and any unsecured debt such as credit cards or personal loans should be minimal.
What if I’m renting privately?
All other lenders require that you to have been renting via a licensed real estate agent but there is an exception to this requirement.
If you’ve been renting for more than six months, have a formal, legally binding tenancy agreement in place and can prove your rental payments with bank statements, we can help you to get approved.
Call us on 1300 889 743 or fill in our free assessment form today.
What if I’m renting with other tenants?
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 rental payments with your bank account statements and your name is listed on the tenancy agreement.
Do the rental payments need to match the minimum deposit requirement?
No. Banks won’t be looking at your complete rental history and adding your rental payments up to see if they equal 5% of the loan amount you’re borrowing.
Does rent need to match the proposed mortgage repayments?
Not necessarily. Although there isn’t specific policy around this, some lenders may require that the current amount that you’re paying in rent is somewhat “comparable” to your fortnightly or monthly mortgage repayments.
This has more to do with your “capacity” or ability to afford the mortgage and banks may place more scrutiny on this if your application is tight in other areas such as your income or employment status.
Again, this isn’t strict policy so it’s best to speak to one of our mortgage brokers so we can properly assess your overall financial situation and select the lender that’s right for you.
Are there other non-genuine savings solutions?
Whether you’re currently renting or not, you can avoid the genuine savings requirement by asking your parents to provide you with a gift or by asking them to act as guarantor for your home loan.
With a guarantor, not only to avoid the genuine savings requirement but:
- You don’t need a deposit.
- You can borrow up to 100% plus the costs of completing the purchase including solicitors fees and stamp duty.
- You can avoid LMI which can literally cost you thousands of dollars upfront.
- You can get same interest rates as if you were applying with a 5% deposit.
Do you need a rent as genuine savings home loan?
Our mortgage brokers are specialists in non genuine savings and no deposit home loans!
Discover if you qualify for a rent as genuine savings home loan by calling 1300 889 743 or by filling out our online enquiry form today.