This is a great question, and I’ve asked Craig Betalli from Our Broker to help answer it. 

While some lenders still consider rental history, Craig notes that it’s less significant for lenders than it used to be. However, having a history of defaulting on your weekly rental payments won’t exactly work in your favour with lenders, either. That said, rental history is becoming a less important factor, especially with the advent of First Homeowner Grants and stamp duty subsidies. 

Generally, as a first-time borrower, when you borrow more than 90% of a property’s value, banks want some proof that you have saved your deposit over time by what’s known as a “genuine savings policy”. It is the only way for the bank to assess if you have some financial consistency. Alternatively, suppose your savings are less than 5%, and someone gifted you part, or all of, your deposit. In that case, the banks will look at your other regular repayments - such as rental history, when considering your creditworthiness. 

Craig explains that nowadays, rental history is less critical for first-time buyers because there are alternative options available. While many lenders still require genuine savings for over 90% of LVR loans, some lenders are more flexible. Also, first-time buyers can use government schemes such as the First Homeowners Guarantee. Still, keeping up with rental payments is good practice—as it shows lenders you have the financial discipline and readiness for homeownership. 

Moreover, family-guarantee products are becoming more common, which reduces the emphasis on rental history. Craig explains that these products can help first-time buyers avoid the need to prove genuine savings. 

Setting the issue of rental history to one side, Craig also points out that one of the biggest mistakes renters make is thinking they don’t qualify for a first home loan. Often, the natural barrier to homeownership is the borrower’s insecurity about the likelihood of obtaining an approval rather than a lack of savings. With some suitable government schemes, you may only need a 5% deposit (or 2% for eligible single parents), and if you can do something like selling a car, you might find yourself with enough for a deposit. 

Craig stresses that many first-time buyers don’t know what options are available. For instance, some won’t discuss family guarantees with their parents because they fear what their family might think. But it’s vital to have those conversations and explore the options available. If you don’t qualify after those discussions, you’ll know at least what steps to take to get into a property. 

We highly recommend seeking the assistance of a finance specialist, such as Our Broker, to help understand what’s required financially and explore the options available to help you buy your first home and jump off the rental treadmill. 

To learn more about your finance options, call 1800 913 677 to talk to Our broker today.