- First-home buyers increasingly rely on flatmates to help secure mortgages, with banks easing requirements.
- Some of the major banks now accept a declaration of intent instead of a boarder’s letter.
- Including flatmates can significantly increase borrowing capacity.
The banks have thrown a lifeline to potential buyers needing help to pay the mortgage.
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Westpac, ANZ and ASB are among the banks that have relaxed the rules on flatmates for first-home buyers.
Applicants can now sign a declaration of intent that says they plan to get a flatmate. Previously, some banks required a letter from the flatmate containing their name, address and signature.
GV Financial Services director Gareth Veale says getting a flatmate is a "huge" boost to how much someone can borrow. Photo / Supplied
Float Mortgages financial adviser Geoff Christopher said many first-home buyers had been unable to sign up a flatmate before their purchase.
He said a letter of intent signalled that the applicant planned to use a flatmate, but it didn’t necessarily hold them to it. The new rules allowed them to go it alone if circumstances changed, such as if they got a pay rise or could further tighten their belts. However, flatmates were always a good option for those struggling to meet their mortgage payments.
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GV Financial Services director and mortgage adviser Gareth Veale said first-home buyers were increasingly turning to flatmates to get their applications over the line because of the higher servicing requirements, lower deposits, and the fact that younger people tended to have smaller incomes.
“They are pulling whatever strings they can to make it happen.”
Veale said including one or two flatmates could make a big difference to someone’s borrowing power. A flatmate paying $200 a week in rent could add about an extra $150,000 of borrowing to a loan, while two flatmates could add $300,000.
“It’s huge,” he told OneRoof. “$150,000 could mean the difference between buying a s*** property and something decent.”
Both mortgage brokers pointed out that banks usually stress-tested a borrower’s ability to pay on a much higher interest rate than what was available, which could mean that the first-home buyer might be able to cover the mortgage themselves once they moved in.
“This is not me saying, ‘Hey use it and lie that you’ve got a flatmate’. Circumstances change, and the banks are not chasing you harshly for it.”
He applauded the banks for the changes, which he said removed the risk of someone fraudulently putting a name to a piece of paper just to get a home loan.
OneRoof reached out for comment to ASB, Westpac and ANZ. ANZ was the only bank to respond.
A ANZ spokesman said while it had not made any recent changes to its policy for providing details of boarders, it did accept adeclaration from a customer that they intended to get a boarder when consideringthe affordability of their loan.
"There are times whencustomers are buying their first home, or building a property, when they maynot yet have a boarder, but intend to get one when they move in."
About a third of first-home buyer applications to ANZ included boarder income and the extra money could be a big help in helping them realise their homeownership dream, he said.
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