Can rental help your mortgage application?
While saving for deposit for a property it is not uncommon for people to live with their parents until they are well into their late twenties, sometimes thirties. It’s not only not uncommon but according to the press its more likely than not. We do not want to make much of what the press says. But with house prices and wages unable to keep up for people, it has become harder and harder to get a successful mortgage application.
Now we have written quite a bit about all of this. Even a helpful guide that went through different aspects of how you could improve your chances of getting a mortgage. Please find the article here.
One of the things that is not on our guide, is your record for renting. And that’s because its not technically counted as part of your mortgage application. Some lenders may look at it. But basically you could pay your rent on time for 5 years and still its not even considered as part of your application.
When a lender looks at your application they want to see if you are “worthy” to pay your mortgage payments. Firstly the lenders want to see if you can afford it, considering your pay and life outcomes. Secondly they look at your credit history to see if you have a past of paying things back right. Finance deals, credit history etc. But they do not necessarily look at your rent history.
It is not per se a debt but it is a show of your ability to pay something back. In a world of climbing debt, credit card spending going out of control. You could be super sensible, live your life to your means, rent, and not rack up debt. You get kind of punished for not having a good credit history.
Back in 2017 there was a petition set up online that wanted parliament to look at encouraging lenders to look at renting as a way to encourage an application for mortgage. It was debated in parliament and some lenders have adopted a policy to at least consider rental history.
So why is rental not as important?
Well there are a few reasons that your rental history is not considered.
- Rental is not a long term debt
Thing is landlords are looking for possibly a year’s worth of rentals, whereas a mortgage advisor is looking for 25 years plus from someone.
- Employment changes
You may be fully employed now, that may change, for a landlord, that may mean you leave the property. For a mortgage lender that could be disastrous for both them and you.
- It is not a debt.
The act of taking a debt is a full promise. You take something and you pay it back. It really resembles a trust, and even if you have any life’s unexpectant events, you still have to pay it back.
So at the moment, yes some lenders look at rental history. But for now you cannot rely on it unfortunately, you have to make sure all the other elements are in line. But on the bright side, lenders are looking at the full picture these days. A good rental history is not a bad thing and it keeps a roof over your head. Never despair always speak to someone you trust and pay your bills!
Your home may be repossessed if you do not keep up repayments on your mortgage.