23 Aug Renting? You can get into your own home sooner using your rental history as proven savings with lenders.
Getting into your first home can seem like an impossible feat for many hopeful first home buyers these days with the cost of living increasing, and on top of that having to pay rent too each week. The dream of homeownership appears evermore distant with many struggling to save that 20% deposit to secure a home loan.
There is light at the end of the tunnel….
You can use rent paid as ‘Proven Savings’ with many lenders/banks
What this means is that with some lenders, you can use your rental history (with certain lenders) to form part of your deposit (on paper) – certain banks will view what you’re paying in rent as genuine savings.
To note: You do still need some small deposit but if you have a solid rental history, some lenders consider this as proof that you have the ability to deposit money on a regular basis (just like saving a deposit with regular deposits) into a bank account.
How is it possible to use rent as a deposit?
In Australia, unless you have the full 20% deposit, most lenders require that you provide ‘proven savings’ – an incremental increase in your savings over a period of time. Lenders have come to realise that (based on a person’s money management behaviour) a person who consistently pays their rent on time is also likely to then pay their mortgage on time.
Certain new home loans available on the market allow you to combine a 5% deposit with a robust proven rental record. Your strong rental record then acts as your ‘proven savings’.
How do you qualify?
In order to qualify for a rent as a genuine deposit home loan, there are certain criteria that need to be met which include;
- A rental ledger from a licenced real estate agent – the ledger must show that you been consistently been paying rent on time and in full for a period of 6-12 months (or even a minimum of 3 months)
- Your rental repayments should be at least 50% of your proposed home loan repayments
- A 5% deposit to form part of your deposit – some lenders will accept this deposit from the following means
Gifted deposit – must be in your account with a signed gift letter
Bonus/Dividend/Commission Income – provide pay slip
Inheritance – provide a letter from the executor
First Home Owners Grant – some lenders will accept this provided you qualify for a FHOG
Tax Refund – provide your notice of assessment
Sale of a (non-real estate) asset – provide evidence of items sold
Talk to us today and let us help you achieve the dream that you know you deserve – get into your first home sooner.