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What are 'genuine savings'?

When you’re applying for home loan, and want to borrow 90% or more of the property's purchase price, you’ll be asked to provide information about your ‘genuine savings’.


This is a term used to describe funds that borrowers have saved gradually by themselves.

When assessing a mortgage application, a lender will want to see that you have diligently saved money over time in order to evaluate whether you have the capacity to make your monthly repayments.

Every lender has its  own definition and requirements for genuine savings, which will depend on the amount that you borrow, and some may not even require it at all.  

As a general rule, lenders will accept as genuine savings any funds that amount to 5% or more of the purchase price.

These include:

  • Savings held or accumulated over at least three months
  • Term deposits held for at least three months
  • Shares or managed funds held for at least three months
  • Cash gift held for at least three months
  • Inheritance funds held for at least three months
  • Contributions from the First Home Super Saver Scheme

On the flip side, the following will not be considered genuine savings:

  • Monetary gifts
  • Inheritance
  • Tax refund
  • Bonuses from work
  • Profit from the sale of an asset other than a property, such as a vehicle
  • First Home Owners Grant
  • Borrowed funds
  • Short-term cash savings

The reason why they are not accepted by lenders is that they do not demonstrate good saving habits.

If you do not have genuine savings, there are alternative solutions available to you so you can break into the market.

For a start, you should speak to a mortgage broker as there a range of specialist and non-bank lenders in the market that don’t require genuine savings. For these lenders, evidence of stable employment and income, plus a good history of paying bills on time are often sufficient.

You can also bypass the need for genuine savings by having a family member go guarantor on your loan.

Moreover, if you’re a tenant, some lenders will accept your rental payment history as evidence of your ability to make your home loan repayments each month.

Requirements will vary from lender to lender but they will want to see that you have paid your rent on time for a minimum number of months and that the lease was managed by a licensed property manager.

Getting your head around genuine savings can be challenging, but a broker can explain it to you in greater detail and answer any questions you may have.

Make an appointment with a Mortgage Choice broker today and we’ll make sure we find the right lender for your financial situation.

 

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