Have you applied for a home loan and the lender asked for the history of your Genuine Savings, and you wondered what it all means?
Genuine Savings are the funds you have gradually saved by yourself. It proves to the lender that you have the self-discipline to save a certain amount over time. This will help them to assess your capacity to make monthly loan repayments. The majority of lenders require that you prove you have genuine savings if you are borrowing more than 80% of the value of a property, or 85% or more in some cases.
Lenders are usually looking for proof of at least 5% of the purchase price in Genuine Savings. Each lender has slightly different definitions and requirements.
What do lenders consider as “Genuine Savings”?
- At least 3 months of accumulated savings
- A term deposit held for at least 3 months
- Shares or managed funds held for at least three months
*Some lenders will consider rent that you are paying over time (preferably 6-12 months) as a part of your Genuine Savings. It’s best to check it with your mortgage broker first.
What lenders DO NOT consider as “Genuine Savings”?
- The “First Time Home Buyer Grant”
- Inheritance
- Gifts
- Tax refunds
- Loaned money
- Money from the sale of a non-investment asset, like a car
You should remember that different lenders have different rules on Genuine Savings, most lenders require some sort of proof.
How much in Genuine Savings do you need?
Typically, you will be asked for a minimum of 5% of the purchase price. For example, on a $600,000 home you would need $30,000 in Genuine Savings. Then you can make up the rest of the deposit from other sources.
There are many options available for borrowers, therefore we think the best strategy is to speak with your Mortgage Broker. They will be able to advise and recommend the best lender suited to your individual situation.
It’s really important to familiarise yourself with the terms, and get a basic knowledge of the regulations. In this way when searching for a broker or making a decision about which lender to choose you have enough information about the matter.
If you are interested to read further about home loans, click here.
