There’s no question that buying a home is a major financial decision and saving for a deposit can be a long road. But did you know you might be able to buy a home by bringing your rental history into the application process?

Here is how renting can help you buy a home faster.

Rental payments to qualify for a mortgage

One of the biggest obstacles in buying your own home is gathering the required deposit. Saving money is hard enough, especially when a significant portion of your income goes to rent.

The good news is that some lenders are now taking rent into account. Depending on who you work with, getting home loan approval may be possible using a proof of rental payment certificate.

Using your records as proof of savings

The cost of living is becoming a significant issue in Australia and houses grow more expensive every year. Lenders are still people; they understand that saving for a deposit is a challenge. That’s why proof of rental payments has come into the equation.

A lender wants to know that you will be capable of paying back the loan they are giving you. Proof of rental payments works for them because they prove that you can consistently make payments. If you can spend several hundred dollars per week on rent, the bank will be reassured that you can afford the same amount on a mortgage.

Most lenders will accept proof of payment over a three-month period but twelve months of rental records will be even better as evidence of your financial stability.

What to share

When you apply for a loan, lenders might ask for a letter from your property manager to show you have consistently paid your rent. This letter is called a Rental Commitment or Rental Reference letter and is how you use rental payments to qualify for a mortgage. It will be the evidence your lender needs to see that you always pay on time.

While this is great news and very helpful, your lender will also want to see some proof of savings. Loans of 100% are exceedingly rare, so you will most likely still need a three to ten per cent deposit to put towards your new home purchase; you can’t rely on your rental history alone.

You will also need to have your name on the property lease.
If you have been paying rent but are not listed on the tenancy agreement, it won’t be as easy to prove your consistency as a tenant. If you are renting with others, you may still be able to use your rent payments towards your home loan if you can prove prompt payments through your bank account but try to get your name on the lease so things are more official.

Other options

Want to get a home loan without a 20% deposit?

Having a parent or trusted family member act as a guarantor can also help you acquire the loan you need. A guarantor takes on the responsibility of paying for your mortgage should you have to forfeit. In some cases, a guarantor will mean you don’t even need your rental receipts, but the two together will significantly help secure a loan without a huge deposit.

Make sure your rent agreement is formally documented

As a renter who is saving up to buy a house, working with a professional property manager makes sense. This person will keep detailed records of all your transactions so when the time comes to apply for a loan you can reach out to them for the documents you need.

To add to this, property managers are a handy contact when you are looking to buy a property of your own because they will have plenty of connections with sales agents. Let your property manager know what you’re looking for and they may be able to support your transition into a home of your own.

Speak with your broker

The other person you need on your side is a broker who can explain the ins and outs of using rental payments to qualify for a mortgage.

Need to know more about buying a home? Contact me today at teresa@teresaberger.com.au.