Question
I have a question for you Mortgage Expert please – Will my rent payments be included in affordability checks when I apply for a mortgage? Also, will regular payments or rent with no arrears help improve my credit score?
To provide some background – I am a 45 year old woman, and have been a homeowner for 20 years but have been renting since then after a divorce. I have saved and am now ready to buy a property. Not sure if this makes me a first time buyer!
I have, for over 18 years, always paid my rent on time. Will this help improve my chances of getting a mortgage?
Darren’s answer
Because you have previously owned a property, even though it was around 20 years ago, most lenders and HMRC will not consider you as a first-time buyer. This means you generally won’t qualify for first-time buyer rates or products.
With that in mind, there are still positives to having a long rental history, depending on your lender.
First, when looking at affordability, lenders primarily look at:
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- Affordability – This means evaluating your income against your monthly expenses to ensure what you can afford. Lenders will also test whether you can afford the payments if interest rates rise
- Employment and financial stability – Lenders will look for income stability through regular employment or steady income from self-employment
- Deposit – The size of the deposit directly affects eligibility and prices
- Credit history – Lenders will evaluate your payment history, use of overdrafts, CCJs, defaults or missed payments
Many lenders will review your recent bank statements, and your long history of making rent payments can prove that you have successfully managed housing costs on par with or even higher than the proposed mortgage payment.
While lease payments do not replace a lender’s affordability assessment, they can provide additional evidence of financial responsibility.
When it comes to your credit score, this will only be positively affected if your rental payments are reported to a credit reference agency.
Rental payments are not automatically included in most credit files in the UK. In order for them to contribute to your credit history, they will usually need to be reported through a tenancy reporting scheme or service.
If your rent is reported and paid on time, it can help build your credit history.
Contact a broker who can guide you through the process from start to finish, ensuring you get the best deal to suit your circumstances.
