A no genuine savings solution

A tenant rental history form confirms how much you pay in rent and demonstrates your ability to save money.

If you’ve been paying your rent on time and in full, you may be in a position to borrow anywhere between 90-95% of the purchase price.

However, not all rental history letters will be accepted. Most lenders will only accept a rental reference letter from your property manager and not from a landlord.

Rental history template

Most lenders will accept the following rental declaration letter template from your real estate agent:

23/03/2018

To whom it may concern,

Re: Rental reference – John Smith

We wish to confirm the following:

Tenant name(s): John Smith
Property address: 1 George Street, Sydney NSW 2000
Commencement date of lease: 1/1/2007 to present
Current rent: $450 / week
Payment history: All payments have been on time during the last 12 months
Should you require any further information, please contact me on 02 9000 0000.

Regards,

(SIGN)

Paul Adams
Property Manager

1 Pitt St Sydney NSW 2000
Ph 02 9000 0000


What is it generally used for?

Use a rent statement letter or landlord reference letter if you can’t prove you’ve saved a deposit.

When borrowing more than 90% of the purchase price, a lender will need to be satisfied with your ability to make repayments.

Generally, you can demonstrate this by showing proof of regular savings over a period of 3 to 6 months.

This is commonly in the form of contributions to a savings account.

These savings will need to add up to 5% of the purchase price plus the costs of completing the purchase.

Otherwise known as ‘genuine savings’, it’s a policy of almost all Australian lenders, and they tend to be quite strict on this requirement.

That means if you’ve been gifted a deposit from your parents or recently inherited a large sum of money, banks will still need to see evidence that you’ve saved 5% of the purchase price yourself.

Luckily, there are lenders out there who will consider verification of rental history from your real estate agent or property manager in place of genuine savings.

This will allow you to borrow up to 95% of the purchase price.

On top of that, you can still get the same competitive interest rates as a standard home loan.

Some lenders will even accept three months rental history backed up by a rental reference letter if you can’t show genuine savings.

Bad credit

A rental reference letter can be used to build a stronger application if you have a poor credit score and can’t prove that your deposit has come from regular savings.

Some lenders will accept your situation, but they will want to see proof that you have the ability to make your mortgage repayments.

Providing a 12-month tenant rental history form is a good indication of your capacity and can help mitigate your bad credit history.

If it’s a private rental (not through a real estate agent), the lender may also ask for six months bank statements showing rent paid.

For example, you could have a 20% deposit, but if you’re discharged bankrupt, and you can’t prove genuine savings, you may get declined unless you can provide a history of rental.

Partial genuine savings

In situations where you don’t quite have 5% in genuine savings, some lenders will accept a proof of rent payment letter so you can borrow up to 95% of the purchase price.


What if I don’t have a rental reference letter?

If you don’t have genuine savings and can’t provide a rental reference letter, we may still be able to get your loan approved if you have:

  • A 10% deposit: With such a large deposit, some lenders will waive the genuine savings requirement, and you can still get a great deal on your home loan.
  • An otherwise strong case: If you’re in a strong situation apart from meeting the genuine savings requirement, we can still help you borrow at 95%. Conditions apply, and your interest rate may be a bit higher depending on what lender we go with.
  • A guarantor: If your parents are in a position to use their property as security for your home loan, you can borrow up to 105% of the purchase price without genuine savings.

How do I get a rental reference letter?

You can contact your real estate agent and ask for both a rental reference letter and a rental ledger.

While a rental reference letter is more of a declaration from your property manager, the rental ledger will provide a clear rundown of the rent you’ve paid over a 12 month period.

This includes how much rent was paid and the date it was paid to the landlord. It’s sort of like a bank statement but for your rent.

It’s preferable that you provide a rental letter over a ledger purely because the ledger has more information on it that the banks can use against you when assessing your application.

For example, if you were late with the rent on just one or two occasions, a lender will be able to see this on the ledger, and it won’t look good for you as a borrower.


What if I don’t have a property manager?

If you’re renting, but you didn’t go through a real estate agent (you’re just in an arrangement with the landlord), the following template will suffice.

However, you’ll need to provide it in conjunction with 12 months (some lenders will accept 6 months) bank statements showing the rent being deducted on a weekly basis:

23/03/2018

To whom it may concern,

This letter is to verify that John Smith has been a tenant in our rental unit located at 1 George Street, Sydney NSW 2000 from 2nd February 2009 to the current date.

The monthly payment is $1,470 and has always been paid on time. This tenant has proven to be an upstanding individual and has shown respect to the property and other tenants.

If I can assist you with further information regarding John Smith’s residency at my property, please feel free to contact me on 02 9000 0000.

Regards,

(SIGN)

Paul Adams
Property Manager

1 Pitt St Sydney NSW 2000
Ph 02 9000 0000


Why do banks ask for this document?

Lenders will ask for a signed tenant rental history form if you can’t prove genuine savings.

The reason that this letter is a good indication of your capacity is that, when renting, a portion of your income is being deducted from your bank account on a regular basis to pay rent.

For some lenders, this is the same as saving that amount every week in a savings account.

Perfect rent over a 12 month period is also an indication that you’ll not miss or default on your mortgage repayments when you get a loan.

It’s important to note that in a low-interest rate environment and, depending on the property price, mortgage repayments can be about the same or less than paying weekly rent!


How do I make sure the letter isn’t rejected by the lender?

Having a good rental history isn’t always enough to get your home loan approved.

Most banks have complicated lending policies which exclude some tenants such as:

  • Sub-tenants (not on the lease).
  • Privately-rented properties (not via a real estate agent).
  • If you do not have a 12-month history. There is an exception to this, with one of our lenders accepting 3 months rental history instead.
  • If other people are on the lease with you (share accommodation).
  • If you have moved house during the last 12 months.

In addition, lenders won’t accept the rental letter unless it contains the following information:

  • Your full name.
  • The property’s address.
  • The commencement date of the lease.
  • The current rent you pay per week.
  • A declaration that you’ve been paying your rent on time for at least the last 12 months.
  • Full name and signature of your real estate agent.

What if I changed addresses in the last 12 months?

Let’s say that you’ve been living at your current address for the past 8 months.

That means you’ll only be able to provide an 8-month rental reference letter. This wouldn’t pass the test with most lenders.

However, if in the preceding 4 months you had been renting elsewhere, you can simply provide a landlord reference letter for this period.

Your rental reference letter doesn’t have to be with the same property, just as long as it’s 12 months of continuous history.

This means that multiple reference letters may need to be provided.


Why don’t banks accept letters from landlords?

Most lenders won’t accept a rental history letter from a landlord because landlords can be anyone.

They’re not registered professionals like real estate agents/property managers.

Hypothetically, you could have a portion of your bank account funds deposited into your friend’s account, and they could then sign a rental reference letter. Don’t do this!

Although banks are quite strict with the rental letter coming from a real estate agent, some lenders will accept a letter from the landlord, if you can provide 12 months bank statements.


What about a character reference?

A bank won’t require a character reference in normal circumstances.

However, you may need to provide one if you’re renting for the first time and cannot provide a proof of rent payment letter.

23/03/2018

To whom it may concern,

I have known John Smith for over 10 years on a personal and professional basis. We went to school together and have also worked together at ABC Mining Pty Ltd.

He has proven himself to be reliable and financially stable. I strongly recommend him as a tenant and expect that he’ll pay the rent on time and look after the property.

If I can assist you with further information regarding John Smith, please feel free to contact me on 02 9000 0000.

Regards,

(SIGN)

Bob Adams
1 George St Sydney NSW 2000


Apply for a rental letter home loan today

Please complete our free assessment form or call us on 1300 889 743 and we can tell you how you can use your rental payments as proof of your ability to pay off a home loan.

Still have questions? Feel free to comment below and we’ll get back to you as soon as possible.

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