Home loans are a huge financial commitment – so it’s important to do everything you can to increase your chances of being approved. One way to improve your eligibility is to provide rental history that shows you’ve been a responsible tenant.

If you’re one of the many young Australians out there trying to buy your first home, listen up! This guide is for you. We will tell you what you need to know about using rental history for mortgage application.

Can rental history be used for mortgage application as a first time buyer?

Short answer: Yes. 

When you’re applying for a first home buyer loan, the bank will look at your credit score and your debt-to-income ratio. Your rental history is usually not a factor in either of those calculations.

But it can be used as proof of “genuine savings” which are a requirement in your first time home buyer loan application. 

Among the other first home loan requirements are: 

  • Proof of identification
  • Proof of income
  • Assets and liabilities
  • Extra documentation (e.g., documents from buyer grants you’re qualified for or from your guarantor if you have one)

Using rental history to qualify for mortgage

So who pays the mortgage broker? 

If you as a borrower are unable to provide 3 or 6 months’ worth of savings, then your historical rental payments on the property you are currently renting would be an acceptable alternative to genuine savings. 

You will need to have made 12 months of rental payments without arrears. To get your rental history report, you can go to paid online resources. You can procure a rental reference letter or rental commitment letter which will be needed by lenders from your licenced property manager. This letter will be a reflection of your capacity to commit to continuous long-term rental payments (because your home loan is essentially like one) and assist towards your character.

The letter must include the following:

  • Full name of tenant as per tenancy agreement
  • Address of the rental property
  • Start date of tenancy
  • The amount paid and frequency of payment
  • Confirmation of 3 months satisfactory Rental payment History

If your rental history meets the policy for genuine savings, you can have a maximum loan-to-value ratio of 95% — which means you can borrow up to 95% of the property value and present only 5% deposit. This deposit can come from any source, e.g., financial gift, personal loan, cash savings outside the bank, business account, and sale of valuable personal assets.

Caveats to using rent as genuine savings

Any loans above 80% of the property value will require you to pay the Lenders Mortgage Insurance premium. 

If you’re wondering which lenders accept rent as genuine savings, there are unfortunately only a select few financial institutions that do. To accelerate the process of getting a home loan, you may need the help of a home loan broker who work with lenders like these.

Fortunately, our mortgage brokers at Stryve Finance offer a wide range of lending products across a panel of over 30 banks. We negotiate between various lenders on your behalf to obtain competitive rates, fees and terms.

What if you have no rental history / bad rental history?

Frankly, it could be more difficult getting a home loan if you have no rental history or bad rental history. However, there are things to remedy this:

  • Increase your deposit
  • Improve your credit score
  • Make no late payments on your bills
  • Pay all your debts and loans.
  • Present proofs of other types of timely payments

The best thing to do when you have a bad rental history or a nonexistent one is to ask a mortgage broker as they help you improve your chances of a home loan approval by liaising with lenders on your behalf based on the information you provide.

Work with the mortgage brokers at Stryve Finance

At Stryve Finance, we want to help people achieve their homeownership dreams. We know that your rental history is a valuable asset, and we’re here to make sure you can use it to your advantage when applying for a home loan. 

Our mortgage brokers are experts in the field, so don’t hesitate to contact us if you need any assistance or have questions about how your rental history can be used as genuine savings on your home loan application.