Using your rental history to get a home loan

by Chris Lang on January 7, 2011

First Home If you’ve ever applied for a home loan, you know that the lender always requires evidence of genuine savings. Which means that people, who are unable to save, often will be turned down.

The turning down part is not limited to just the big spenders or shopaholics, but includes everyday folk struggling to make the ends meet. The lenders don’t take into account the reasons why people are unable to save – the high rents, the rising utility bills, all of these everyday expenses. Or at least this was the situation not long ago.

Now there is one lender, St George Bank (and this could be a beginning of a trend) that will take rental payments into account as evidence of savings. It beats me why there is only one, because this makes so much sense – if a person was able to pay rent for a year, if they were to live in their own house, the rent money would be paid to cover mortgage repayments.

According to a mortgage broker company Loan Market, St George will accept rent as a form of savings for a home deposit if there is evidence of a minimum of 12 months continuous, satisfactory rental history and the property is leased through a licensed property manager (read the full article here).

Naturally, this helps first home buyers who are struggling otherwise to get a mortgage. I doubt, however, that St. George is doing this purely in first home buyers’ interest. It is no secret that home lending has been going through a rough period for a while now. I’ve read an article recently saying that growth in lending to home-occupiers has fell to 7.3%, its lowest level in 20 years.

So that could mean that lenders are desperately searching for ways to grow, for new clients, and this is their excuse to relax the selection criteria. They let more people apply for and get a loan, as a result their growth picks up.

But at the end of the day, if this helps a family buy a home, the reason doesn’t matter – it serves a good cause.

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{ 2 comments… read them below or add one }

Adam January 7, 2011 at 1:15 pm

I think this ‘initiative’ is actually detrimental to people preparing to buy a home. This is the first significant relaxation of lending standards in Aus major banks since GFC. It means greater debt is easier to acquire with less initial equity. The consequence could be that with increased access to credit there will be more competitors and prices will simply rise (again) in response… which actually defeats the whole purpose of making it easier to purchase a home. But hey, at least you’re on the bank’s books right? 😉


minority scholarship January 21, 2011 at 2:07 am

What a great resource!


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