how is rent viewed by banks when applying for a mortgage? ability to repay mortgage?

M

Mogli

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Hi Guys, how is rent viewed by banks when applying for a mortgage? Is it viewed as ability to repay a debt? i know this may be a silly question but as lenders are changing the goalposts regularly......
 
Rental income from an existing investment property?


Or rent paid as a tenant at the moment?
 
Don't understand how it's viewed as savings if the OP has been paying rent for accommodation, she no longer has the money so how can she be saving it?
 
pixiebean22 said:
Don't understand how it's viewed as savings if the OP has been paying rent for accommodation, she no longer has the money so how can she be saving it?
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I suppose that the mortgage will take the place of the rent so showing ability to pay the rent will show ability to pay a sililiar mortgage amount?
 
I would think that the ability to pay rent over a number of years without fail/delays etc (your bank would more than likely ask for rent book or bank statements to back this up) would reflect well on your ability to repay a mortgage but i don't understand how this is classed as savings?
 
I think it's because if you weren't paying rent, the amount would be going into savings towards your deposit / mortgage. Sorry, I just remember being told this when I was taking out my mortgage
 
But it's not savings. If you weren't paying rent in most cases the money would be going into savings for deposit etc but if you are paying rent this money is going into someone elses's pocket so it's no longer your's. I just don't understand how it's classed as savings. It's not like the bank can contact any previous landlord and say "yes we'll have that now for a deposit".
 
pixiebean22 said:
I would think that the ability to pay rent over a number of years without fail/delays etc (your bank would more than likely ask for rent book or bank statements to back this up) would reflect well on your ability to repay a mortgage but i don't understand how this is classed as savings?
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It's not actually classed as savings. It can be used to show repayment capacity though. If you can show you can afford the future repayments on the mortgage (stress tested at 6%) through a combination of rent and savings then you have passed the first step in getting a mortgage.

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NorfBank has hit the nail on the head...the bank need to see that you can repay the mortgage stressed amt and to do this they will look at your savings and/or rental payment history

without either of these you will not get a mortgage
 
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