Owning a house can seem out of reach, particularly if you’re having to pay rent. Not only do you have to save a deposit (unless you receive a gifted deposit from a family member), but you’ll also have to show lenders that you can afford the mortgage.
Lenders such as banks and building societies have different rules on what they’re able to lend.
Many of them are recognising how difficult things are for first time buyers. As a result, they’ve come up with some innovative ways to help.
What is a Track Record Mortgage?
Track record mortgages are designed for renters with a proven history of paying their rent on time.
Some lenders have specific products for first time buyers who are renting. Others will allow you to borrow more if you can show a track record of renting.
These are some of the things on offer with Track Record Mortgages:
- Your rental history – you’ll usually need to have paid rent consistently for 12 months, within the last 18 months to qualify.
- Flexible deposits – some will allow you to secure a mortgage with a low deposit, such as 5%. In contrast, others may not ask for a deposit at all.
- Fixed interest rates – often fixed for five years, which can help with budgeting.
- No fees – some of these products come with no application or completion fees.
- Maximum borrowing – will usually be based on a combination of your existing rental payments and a check of your income and expenditure. This potentially makes it more flexible than some other options.
Does rental history affect buying a house?
In the UK, most mortgage lenders generally don’t automatically consider your rental track record as part of their affordability criteria. They tend to look at other factors, such as your income, deposit amount and credit history. However, with first-time buyers finding it hard to buy a property, some lenders have decided to consider it.
Typically, borrowers can expect to be able to achieve a loan-to-income ratio of around 4.5. This would mean that you can borrow up to 4.5 times as much as you earn. Of course, this will vary by lender and will also depend on affordability checks. These are to see if your proposed monthly payments are affordable both now, and if rates rise in the future.
However, if you’re currently renting, a small number of lenders, including Suffolk Building Society, will potentially lend you a greater multiple of your income. For example, we’ll consider lending 5.49 times your income if you meet our rental history criteria, compared with our standard multiplier of 4.49.
To qualify, applicants need to demonstrate they’ve paid rent for 12 months at a rate that is within 10% of their prospective new monthly mortgage payments.
So, if you’ve been renting for a while and are thinking about applying for a mortgage, it may be worth considering providers that take your rental payment history into account.
Do mortgage lenders take rent into account?
Not every mortgage lender will take your rental payments as proof of your ability to repay a mortgage. Instead, they’ll assess your overall income and financial stability, including any other debts that you have.
They’ll also look at your outgoings, including your regular household bills, plus your credit history and the size of your deposit. This is to ensure you’ll be able to manage your mortgage repayments now, and in the future, especially in the event of your circumstances changing, or interest rates rising.
If you’re looking to get on the property ladder, why not take a look at mortgages for first time buyers. Or if you’re keen to get started, fill out our decision in principle (DIP) form. It only takes around 10 minutes to complete. While we can’t give you an instant online decision, our expert team will review your request individually to see if we can help.
Of course, you should always ensure you have all the information you need before making a decision. So, make sure you’re aware of all the options and if you have any questions, it could be worth speaking to an independent mortgage broker for some impartial advice.
