Feb 8, 2022 8:31:30 AM

Using Your Rental History to Buy a First Home

Topics: Mortgage Broker, Financial Health, Home Loans 0

Most first home buyers will agree, saving a deposit while paying rent is not easy. Luckily, there are lenders in Australia that understand this conundrum too, and are lending based on a strong rental history rather than just genuine savings. If you’re a first home buyer who is tired of paying hefty rents that fund your landlord’s mortgage instead of your own, read on to find out how being a good tenant could work to your advantage.


Rental history vs. genuine savings

When it comes to buying a first home, saving a deposit is often the biggest hurdle that first home buyers face. Most banks require evidence of at least five per cent of genuine savings to be held in a bank account over a three-month period. And that can be tough to do, when you’re trying to pay rent and cover living expenses.

However, there are some lenders in Australia that will consider lending to borrowers with less than five per cent deposit on the basis of a strong rental history. While you will still need to save a deposit, instead of having the full five per cent genuine savings for a three-month period, these lenders will take into account your regular rental payments as a reflection of your ability to manage mortgage repayments.

So, if you haven’t quite managed to save up your five per cent genuine savings, your rental history may be considered as part of your genuine savings. In this case, lenders may accept any of these as part of your five per cent savings:

  • The First Home Owner’s Grant
  • A tax refund
  • A gift from family
  • An inheritance or bonus
  • The sale of a car or other asset

Proof of on time, in full rent payments

To be eligible to use rental history as genuine savings, you’ll need to provide evidence in the form of:

  • A rental history letter or rental ledger from a licensed real estate agent confirming your rent has been paid in full and on time for the past 12 months.
  • A rental letter from your property manager confirming your rent has been paid in full and on time for the past 12 months.
  • A copy of your formal tenancy agreement in conjunction with your bank statements
  • In most instances, the borrowers will need to be exactly the same parties as the tenancy agreement, so if you share a premises with other people, that may not work here.

Get the right help

There are only a handful of lenders that will consider rental history as a form of genuine savings, so it’s worth getting help before navigating this part of the mortgage market. The best thing to do is to contact a Mortgage Express broker who can assess your financial situation and rental history and match you up with the right lender for your situation, or, at the very least, help you plan and set goals for getting into your first home.

While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken by Finservice Pty Ltd (Mortgage Express) for any errors or omissions. This publication does not constitute personalised financial advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication. A Disclosure Statement is available on request and free of charge.

Finservice Pty Ltd (Mortgage Express) is authorised as a corporate credit representative (Corporate Credit Representative Number 397386) to engage in credit activities on behalf of BLSSA Pty Ltd (Australian Credit Licence number 391237) ACN 123 600 000 | Full member of MFAA | Member of Australian Financial Complaints Authority (AFCA) | Member of Choice Aggregation Services.