October 26, 2016
In part one of our home loan deposit blog, we looked at why the amount of your deposit was important. In part two, we look at what counts towards your home loan deposit.
What counts towards your home loan deposit?
Genuine savings are savings paid into an account for at least a three month period. Genuine savings are viewed as evidence to the lender that you are capable of making regular payments and therefore capable of maintaining the repayments on a home loan.
Whilst some lenders may offer loans of up to 97% of the property’s value, most will want to see a history of genuine savings to the value of at least 5% of your new home’s value.
Investments, shares, equity in other properties
Making regular deposits isn't the only proof of genuine savings. Lenders will also view the following as proof of genuine savings:
- Term deposits held for at least three months
- Shares held for at least three months
- A gift of money held in an account for at least three months
- Inheritance when held in an account for at least three months
- Equity in an existing property
Gifts of money
With house prices consistently climbing, it’s becoming more and more common for parents and family members to help their children get into the property market with a gift of money.
When a family member does gift the money, the lenders will be looking for proof that this is in fact a ‘gift’ and that you are not expected to repay the money. Lenders will want to see a statutory declaration that the money comes from an immediate family member and is non repayable. Different lenders require different levels of detail around the use of a gift of money, so it’s best to speak with a mortgage broker to see what the specific requirements are.
In general, most lenders will require the money to be held in a savings account for at least three months for it to be considered as genuine savings. However, it’s not always necessary to have the gift deposited for three months as not all lenders require the gift to fall into the ‘genuine savings’ category.
Proof of consistently paid rent (as genuine savings)
For some lenders, your rental repayment history can be used as proof of genuine savings. Lenders will view your rental ledger as proof of genuine savings under certain conditions:
- You are still renting when you apply for the home loan
- You have a minimum of 12 months of rental ledgers within a single property
- You currently lease through a registered property manager or real estate agent.
Only some lenders will accept rental repayment history as genuine savings and many will also require you to have some other proof of savings, either in the form of a gift of money, or regular savings in an account for at least three months. We will look at your individual circumstances and work with you to identify the lenders that will be able to offer the right loan for your situation.
To find out how your deposit will affect your situation, call us today on 03 9432 6070 or contact us online at the top of this page.