Rent as genuine savings
Looking to make the transition from renter to homeowner? Well did you know your rental history can help you get a home loan?
Here’s how paying your rent on time and in full can actually work towards you becoming a homeowner sooner.
Rent as genuine savings
It’s no secret that house prices are at record highs in many places across the nation, and for those looking to make the transition from renter to property owner, things are particularly tough.
On one hand, you’re trying to save for a deposit for a property and show you have genuine savings while on the other, there’s a good chance you’re forking out for some pretty costly rent.
But here’s something you may not realise – your rental repayment history can potentially be used as a substitute for genuine savings and that can help you secure a home loan sooner.
What you need for a home loan
When it comes to securing a home loan, borrowers need to meet a series of criteria, including:
- A deposit
- Sufficient income to service the loan
- A good credit rating
- Genuine savings
And it’s this last one where your rental history can potentially assist.
What are genuine savings?
If you are looking to borrow more than 85 per cent of the property price, many lenders will require genuine savings of at least five per cent.
This proven history of putting money aside indicates you have the financial discipline required to service a home loan, particularly if you’re after a higher loan to value ratio (LVR).
Why rent might count
Genuine savings doesn’t necessarily have to be money you put aside in a specially designated bank account.
In some cases, lenders will accept the rent you pay as this genuine savings component.
To qualify, you’ll usually need to show a track record of your rent being paid on time every time, with some lenders requiring up to 12 months of evidence while others need as little as three months.
This evidence could be in the form of bank statements, but in some cases your lender might require a signed declaration from your real estate agent, along with your rental ledger.
The bottom line
It’s interesting to note that a great rental history isn’t just pertinent to renting properties in the future, it can potentially work towards purchasing a property as well.
It’s also important to appreciate that everyone’s financial situation is different.
This article is general in nature and doesn’t take into account your personal financial situation and objectives.
If you are looking to secure a home loan, you should seek independent advice on the best course of individual action.
How we can help
Our experienced property managers pride themselves on establishing great relationships with both rental occupiers and owners.
We manage every property as if it were our own and you can learn more about our property management services here.
Alternatively, if you are looking to rent a property, you can view the properties we currently have available here.
