If you’re considering purchasing a home soon, you’ll need to understand how genuine savings for home loans works.
What is genuine savings?
Genuine savings has quite a simple definition with every lender (despite each lender being able to have their own definition):
- Money you’ve actually saved, and can prove you saved it.
- Equity in a property.
- Money from sale of assets or gifts must be held in a bank account for at least 3 or 6 months before it’s classified as genuine .
What is not genuine savings?
Money from virtually any source that hasn’t been earned through your regular income is not considered as genuine. Unless it satisfies in the above mentioned scenario’s.
For example:
- Lump sum deposit within the recent period is not genuine savings, you will have to prove the source of the funds.
- A gift is not savings.
- The sale of a car, or other assets do not classify as genuine savings.
How long do I need to hold the savings?
Every bank is different – some have a 3 month saving period, others have a 6 month savings period.
How much genuine savings do I actually need?
5% genuine savings is the magic number that all lenders seem to have adopted.
Unless you can satisfy a loophole, there’s some lenders that will consider avoiding the genuine part of the criteria.
When do I need genuine savings?
It depends on the lender, and on your personal situation.
Generally when you are borrowing more than 85-90% of the purchase price you’ll need to prove savings.
Therefore if you’ve got less than 10 or 15% deposit – there’s a really BIG chance that your lender will require genuine savings proof.
LUCKILY some lenders specialise in the non-genuine savings loans, and will lend 95% without genuine savings.
How to avoid genuine savings criteria…
Option 1) Family Guarantee
These are very common for first home buyers or first time property investors.
If a family member can act as a guarantor you might be eligible for a No Deposit Home Loan.
Instead of gifting cash, a family member will help with some of their “equity”. It’s a great way for mum and dad to give the kids a head start as well as help them AVOID hefty Lenders Mortgage Insurance premiums.
Option 2) Have you been paying rent?
With impeccable rental history over the last 6-12 months, at the time of writing, there are at least a couple of excellent lenders (with great rates) that waive the genuine criteria.
You’ll still require 5% deposit but this can be sourced via First Home Owner Grants, gifts, and sale of assets.
Your name must be on the lease and rental ledger statement for verification must be provided.
Option 3) Pay a higher interest rate
If you’ve got access to the 5% deposit but don’t have the genuine savings, you’ll still have options. You might just have to deal with a slightly higher interest rate for a while.
Option 4) Stop complaining, start saving!
- Start saving!
- Change your habits, one at a time. I’m passionate about this. Start here at dailystoic.com
- Start investing a percentage of your income, and slowly increase that percentage as much as possible.
Do yourself a favour and read this book front to back by Tony Robbins.
It’s called “Unshakeable”. You might not relate Tony Robbins with “Wealth Creation advice” but you certainly will after reading this book and understanding the credentials of the participants that helped him create the content.
You CAN achieve real wealth, start taking action today.
Next Step for you today:
Talk to an expert who can help advise you on exactly what you need to get qualified for a home loan.
You’ll need savings, but you might need more than just the 5% to be able to settle on a purchase.
Find out what all the costs are, get a live demo where we share our screen so you can see how it all works – and then get some live product comparisons as we search the market for the best loan live with you.
Updated 14 September 2020