Using Rental History as Genuine Savings

May 15, 2017
Ben Herden

You’ve been renting for more than 12 months, and try as you might saving that 5% deposit for your first home, and paying rent is difficult.  But did you know that some lenders can use your rental history to substitute for 5%genuine savings towards a purchase? So long as you can obtain the 5% deposit from other means, such as a gift or inheritance or first home saving grant,even other borrowing ,your savings problem may be over.  

We are specialise is this strategy so call us on 02 9525 4544 or book an appointment today

How does it work? There are a few lenders who will accept your past rental payments as an acceptable form of genuine savings (GS). The key points the lender will be looking for are 1) at least 12 months continuous rent history in same property and 2) that the property lease is managed by a licensed property manager/ agent.  They want to see you have made a financial committment and stuck to it.  

Do I still need my 5% deposit? Yes you do need to find at least 5% deposit to contribute to the loan for the property purchase as well as stamp duty and other purchase costs. In fact this is the key part, you still need to have the 5% deposit to meet the genuine savings rule as imposed by the lenders plus the stamp duty cost.

However whereas ‘genuine savings’ needs to be in your account for at least 3 months, using this strategy your deposit can come from any source such as a gift, savings held somewhere else, business account, sale of car of other personal asset or even boosted by having a personal loan Do you want to know more or have questions to ask call us on 02 9525 4544 or email Mortgage Choice in Gymea.  

What is the maximum Loan to Value Ratio (LVR) a lender to will go to using rental as GS? Depending on the lender some may go to 95% others as high as 97% after including the cost of Lenders Mortgage Insurance (LMI). So if you’re a first home buyer and will be getting the $10k NSW grant (that applies to a new home purchase) , you can use this and maybe a gift of money, or extra borrowed money via a personal loan to make the deal acceptable and within the LVR range for the lender.

Do the rental payments need to match the minimum deposit? Generally no, so irrespective of your weekly rent, your 12 months rental history will (in most cases) satisfy the lenders GS requirements. The total rent does not be to equal the 5% of the loan amount being applied for.

Do all banks accept rent as GS? No - only a handful.  Knowing which lenders do and the difference in each of their policies is important to ensure your case is lodged correctly. Call us today in Gymea on 02 9525 4544 for more guidence on this stratgey or fill out the form on this page to request a call back. 

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