When applying for a home loan, lenders will ask about your savings. These savings will be classified as either ‘genuine’ or ‘non-genuine’ savings. Genuine savings are funds that you have saved over time and held in your possession, generally for a minimum of three months. They demonstrate your ability to manage your finances and save regularly, which is crucial for lenders to assess your financial stability and get comfort that you are a good candidate for a homeloan.
Not all lenders are created equal, and our mortgage brokers have access to lenders that do not effectively have a policy, so you don’t need genuine savings to borrow up to 95% of a property you are purchasing.
As a general rule, lenders usually require you to contribute at least 5% of the purchase price when buying a property, and this tends to be the same amount of genuine savings you need to prove. For example, if you buy a home for $500,000, you would need $25,000 in genuine savings. The amount of genuine savings required can vary depending on the lender and the loan-to-value ratio (LVR) of your home loan. Genuine savings rule generally don’t apply when you are needing to borrow 85% of the property value or below. Here’s a full breakdown:
Most banks have their own unique definitions and requirements for genuine savings, but here are a number of common factors shared amongst many lenders on how you can show genuine savings:
Non-genuine savings refer to funds that have been recently obtained and have not been saved by the individual or held in their possession for a minimum of three months. These may include:
You can build your genuine savings the same way you would with your regular savings. Here are some suggestions:
If you do not qualify for genuine savings, you can consider the following options:
Lenders that offer non-genuine savings home loans generally require the borrower to satisfy strict lending restrictions to qualify for the product, and the interest rates and fees may be slightly higher than the markets best rates. Although different lenders have different conditions, some common limitations include:
For more personalised advice and assistance, contact one of our mortgage broker in Melbourne, Sydney or Byron Bay. They are here to help you navigate the complexities of genuine savings and find the best home loan options for your needs.
