FTB Rental Trap

Counting

Are there any lenders that take consistent rental payments into account as a positive factor in an application?

The £850 per month rent is restricting out ability to save anything substantial, it has taken us 3 years to save £10k and we still have a long way to go. We knew this would be the case, but incredibly frustrated as every month we demonstrate that we can manage what is effectively our landlord's mortage repayments, but get no recognition for it.

As a lender, who realistically represents the greater risk:

Couple 1 (us), combined salary £65k, consistently paid £850/month rent for last 3 years, both 900+ credit scores, but only with a £10k deposit

Couple 2, combined salary £45k, currently living with parents, £25k deposit (of which £20k was gifted to them by family)

Couple 2 are good friends of ours and have been approved for a £160k loan, whilst we will have to save another £6k which will take at least another year to even get a 10% mortgage. Not bitter - just frustrated!!

tootiefrooties

I think the answer to your question is no, I'm afraid.

I completely sympathise as my husband and I have been renting privately for 5 years. The first few years we were both full time students, and accumulated a lot of debt on cards just trying to get by on rubbish student loans and part time jobs. He's now been working three years and this month we paid off our final chunk of credit card debt. I've been working full-time for one year and as of next month we can begin saving. Our combined income is £47k and our rent is 800pcm - not much less than yours, but a much lower income. We'll be putting aside 50% of our after-tax income every month, aiming for £24k in a 12 month period (190k 10% deposit and the rest for fees). It's really tight, but we're used to living on a shoestring as it's all we've done for the last 5 years. We've been on this exact budget for the year I've been working too, and that's enabled us to pay our debts off fairly quickly, considering their size. Very cheap food shopping (£30 a week), no luxuries (Sky TV etc), very limited spending money, switching down to cheaper phone and broadband etc. and you'll see the savings. On your combined income, and rental amount, you could save £30k in a year if you really cut down - although I'm assuming you have no children or debts, and if I'm wrong then that will be a factor. We also only have one car, and a second car could knock a couple of hundred off your savings balance each month.

Good luck and be patient - but do look at your budget and see what you can cut out, because £10k in 3 years is not a lot on your salaries.

hth

beecher2

No, it wouldn't make any difference at all to a mortgage application. With a combined salary of 65k you should be able to save a lot more than £277 a month. Go to Debt Free Wannabee for help in budgeting in order to build up a deposit quicker.

Tygermoth

Hi tootiefrooties,

My Partner and I earn £7k less than you and pay £48 more rent but near enough for comparison...... Would you consider buddy'ing up with me to pass on how you get 24k?

I am really interested and would like to know the ins/outs of how you save the pennies as we are looking to start really saving to get our own home

If you fancy it PM me.

Regards and best wishes on your mortgage journey.

tootiefrooties

Tygermoth wrote: »

Hi tootiefrooties,

My Partner and I earn £7k less than you and pay £48 more rent but near enough for comparison...... Would you consider buddy'ing up with me to pass on how you get 24k?

I am really interested and would like to know the ins/outs of how you save the pennies as we are looking to start really saving to get our own home

If you fancy it PM me.

Regards and best wishes on your mortgage journey.

Hi

My income is currently 1370 per month after deductions, and my husband's is 1612. That totals £2982 in per month. Our outgoings are 1544, leaving 1438 to save per month (x12= 17,256 'basic' savings).

car (tax, petrol) = 160
rent = 800
talktalk line rental and broadband = 19
pet 'pot' (food, litter, vets) = 20
tv licence = 13
grocery shopping = 120 (cook everything from scratch, only eating meat a couple of times a week and making it stretch, eg. a few rashers of bacon in carbonara, or a small pack of mince to make spag bol lasting 2 nights)
council tax = 170
gas and electric dd = 62
pet insurance = 20
contents insurance = 20
2 x mobile phones (iphone sim only with data and texts - tesco) = 20
2 x spending money = 120

Which makes me realise that my (cough- attempt at-) maths was misleading. I go by the budget spreadsheet I use, which shows 24k in May next year. I forgot to factor in the fact that I'll be putting aside an extra 1k in Summer (I'm a teacher and will be examining in the summer holidays), £1k over the year (ebaying everything in sight) and that both my husband and I will be getting a payrise this year. ...Fortunately, I teach English, not Maths!

Even so, it's possible to live reasonably on £1500 per month, even with high rent, which would leave the OP an awful lot to put aside in savings.

Sorry I wasn't more helpful!

davilown

My oh and I earn about the same, but have save 10k in a year - why can you not save more? Do you have debts to service etc?

Counting wrote: »

Are there any lenders that take consistent rental payments into account as a positive factor in an application?

The £850 per month rent is restricting out ability to save anything substantial, it has taken us 3 years to save £10k and we still have a long way to go. We knew this would be the case, but incredibly frustrated as every month we demonstrate that we can manage what is effectively our landlord's mortage repayments, but get no recognition for it.

As a lender, who realistically represents the greater risk:

Couple 1 (us), combined salary £65k, consistently paid £850/month rent for last 3 years, both 900+ credit scores, but only with a £10k deposit

Couple 2, combined salary £45k, currently living with parents, £25k deposit (of which £20k was gifted to them by family)

Couple 2 are good friends of ours and have been approved for a £160k loan, whilst we will have to save another £6k which will take at least another year to even get a 10% mortgage. Not bitter - just frustrated!!

CloudCuckooLand

beecher2 wrote: »

No, it wouldn't make any difference at all to a mortgage application. With a combined salary of 65k you should be able to save a lot more than £277 a month. Go to Debt Free Wannabee for help in budgeting in order to build up a deposit quicker.

Spot on.

Haven't attempted the tax/NI subtraction maths, but you appear to have roughly £3k to £4k take home.

Only £850 rent, then allow the same again for living costs = £1700 total outgoings, leaves £1300 to £2300 spare cash each month..?

Even if you "needed" £1k to live on, outside of rent (which many people live on including their accomodation costs), you'd have £1k to £2k spare...

What are you spending it on?

Conrad

Counting wrote: »

Are there any lenders that take consistent rental payments into account as a positive factor in an application?

Yes, but not so as to be able to circumvent the rules on prudential lending.
Following the credit crunch lenders have had to put much more aside in captial, and one way this is achieved is by requiring larger cash deposits.

This is to held protect against a future credit crunch and to ensure savers stand a better chance of not loosing money if the Bank fails.

Lord Woolf is releasing a report to Government that lenders have to have even larger cpaital reserves, indeed the largest ratio in the world.

Henry_P_Chester

Couple two are less risky for the bank than you. Banks require large deposits to insure against the house being sold for less should the bank have to repossess. In the current climate of falling prices this is even more important. Both you and the other couple could lose your jobs and fall behind on repayments and get repossessed. This is a risk regardless of whether you have consistently paid your rent. If this did happen and you both got repossessed the bank is much more likely to lose money on your loan than on the couple with a greater deposit.


Could you move back in with your parents while you save up for a year or two?

brian_723

I am afraid if you want to have your own home you have to sacrifice ,the couple that moved in with parents are sacrificing their space so that they can achieve their aim quicker .That is one hell of a combined income and i would have thought you could of saved more .I suggest you sacafrice for a year and get a bigger and better deposit ,rent a double room bils included, put your stuff in storage if you have to .Do not go out and save every penny before you know it a year will have passed and you will have a decent sized deposit .Then when you move into your own home you will know it was all worth it .



The couple that moved in with parents and got gifted may not in practice be use to bills on paper but the will be able to show the bank that they saved for a big deposit .The bank will be happy because if the couple can not afford to repay they can repsosses and be confident of geeting their noney back due to siz of their deposit .

good luck on your goal ,I am doing the same ,only smaller salary and on my own.

Odette

I sympathise with the OP I really do. Often I look at my friends who are getting gifted deposits and get a bit down. Its hard when you have to do it by yourself.
However, we pay £700 rent and make around 50k between us and I alone have saved one grand in three months. I strongly suggest, like others have said, you look at your outgoings. If you arent able to budget and maybe cut back now, it will be alot harder when you have a real debt like a mortgage.