The term ‘genuine savings’ refers to the money that a borrower has saved up over a period of at least three months. It is possible to convert any deposit into genuine savings by waiting for three months. All one needs to do is deposit the funds into a savings account, add to them every month for three months, and voila! The funds are now considered genuine savings. However, this rule does not apply to deposits that have been borrowed.
What Is Accepted As Genuine Savings?
To qualify for a loan, some lenders require that you have savings that have been in your account for at least three months, equity from a property, dividends or bonuses that have been held for three months, or a history of consistent rental payments. In some cases, gifts, inheritance, or deposits paid to builders may also be considered genuine savings if they have been in your account for at least three months. However, government grants like FHOG, proposed savings or rental-purchase plans, savings not held in your account, and windfall proceeds are not accepted as genuine savings.
Can I Get A Home Loan With No Genuine Savings?
It is possible to obtain a home loan even if you do not have genuine savings. There are various methods to achieve this, which we will explain in the following section. One option is to select a lender that does not require genuine savings. With these loans, you can borrow up to 95% of the property value and the interest rates are typically the same as for a regular loan. It is essential to have a strong asset position, stable income, and employment. While a deposit is still necessary, it can come from almost any source. If you have no deposit at all, consider a guarantor loan. It is important to note that there are other specific criteria that will be evaluated when assessing your application, so please refer to our no genuine savings home loan page for further details.
Why Are Genuine Savings Policies So Strict?
Lenders’ strict policies regarding genuine savings policies often come as a surprise to those who are not part of the mortgage industry. To illustrate, if you plan to purchase a property for $600,000, you may be required to provide proof of $30,000 (5%) in savings. Some lenders may automatically reject your loan application if you only have $28,000 saved and the remaining $2,000 came from another source. The reason for this strictness is due to the Lenders Mortgage Insurance (LMI) providers who insure loans for over 80% of the property value. This insurance reduces the lender’s risk in case the borrower fails to repay the loan. If a lender makes a claim on a mortgage insurance policy because the borrower failed to pay their loan, the mortgage insurer will audit the original approval. If they find that the lender did not have evidence of exactly 5% or more in genuine savings during loan approval, they will not pay the insurance claim.
Understand How A Bank Analyses Your Savings
The way you manage your money and your savings will be analyzed by the bank. Some lenders may not consider lump sum deposits as genuine savings unless they have been held for over 3 months. However, we can connect you with lenders who will consider them for a loan of up to 90% of the property value. Additionally, making extra repayments on a loan and redrawing those funds when needed is a responsible way to save, but not all lenders view it as genuine savings. We can help you find lenders who will consider savings in a loan account. The bank will also check your savings account transactions for any undisclosed debts, expenses, or dependents.
Our expert mortgage brokers can tell you if your deposit will be considered genuine savings, whether you can use your rental history and whether you can qualify for a loan without genuine savings.
Please contact us to discuss your specific circumstances.