Renting is one of the biggest roadblocks keeping many young Australians from saving enough money to own property. Lenders generally consider genuine savings as the ultimate basis for financial capacity to manage long-term mortgage payment.
Fortunately, you can use rent as genuine savings when buying a house-and-lot package or vacant land for sale around Geelong, Victoria. If you have at least six months of strong rental history, you might no longer have to save cash worth 5% of the property value. This privilege is convenient because it allows you to gain a foothold in the housing market sooner.
However, you might still encounter several challenges along the way. Here are some of the problems that renters face when applying for a mortgage:
Finding a Lender Willing to Play Ball
Most lenders have a stringent genuine savings policy, and many of them aren’t willing to make exceptions for model renters. Without using a broker’s service, finding a bank that will gladly accept your satisfactory rental history as an alternative to genuine savings can be exhausting and frustrating.
Needing to Maintain a Stellar Credit History
Without saving adequate cash to pay your share of the property price, a lender would take a more conservative approach before loaning you money. Much of the attention might be focused on your credit.
A lender would be keener to scrutinise your ability to manage your debts, especially credit cards and personal loans. To be creditworthy enough to qualify for a mortgage, you need to have a high credit score. Correct all errors on your file before your meeting with a lender to prevent any score reduction that can affect your creditworthiness.
Coming Up With a Minimum Deposit
Even if you could use your rent as genuine savings, you would still need to pay a minimum deposit. Most banks aren’t comfortable lending 100% of the property value unless there’s a guarantor involved.
The good news is that you can use many types of funds to put down enough money to buy a piece of real estate. A gift from your parents deposited to your account and seasoned for at least three months is a viable option. Other windfalls, like bonuses and inheritances, as well as asset sale proceeds and tax refunds, are likewise acceptable. The only condition is that you provide ample evidence validating these deposit sources so that a lender knows that such funds didn’t come from a loan.
Being Forced to Save
Some lenders might still ask you to produce genuine savings equivalent to 1% to 2% of the property’s price instead of the usual 5% to grant your mortgage application. Although such a requirement is relatively easier to meet, satisfying it won’t happen overnight.
Getting Disqualified for Leasing from a Relative
You should be leasing a place through a licensed property manager or a private individual. If you’re renting a property owned by a family member, a financial institution might not relax its genuine savings policy and observe it as normal.
Rent trap is slowly becoming less of an obstacle to home ownership. Ask your landlord for a copy of your rent ledger to review your recent history and work on areas for improvement to be a more attractive mortgage borrower.
1 thought on “Mortgage Application: Challenges When Using Your Rent as Genuine Savings”
Pingback: Four Ways to Build up Genuine Savings During a Pandemic | Ronpenndorf
Comments are closed.