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What is the difference between genuine and non-genuine savings in a home loan application?

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Coming up with genuine savings is a necessary part of the home loan application for most home buyers in Australia. Your ability to prove genuine savings can tell a lender a lot about you as a borrower, so it’s important to grow your savings before you apply for a home loan.

Here we’ll explain what counts as genuine savings and what doesn’t, why lenders require them, and how you can still buy property without them.

What are genuine savings?

Genuine savings is a term lenders use to describe money that a home loan applicant has saved up over a period of time (typically at least three months). So, think about long term savings here. For example, if you’ve been routinely putting aside $500 every month into a high interest savings account for two years, you’ll have saved $12,000 plus interest.

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Why do lenders require genuine savings?

Most banks and lenders will require proof of genuine savings in all home loan applications. Genuine savings shows a lender that you are capable of budgeting and managing your finances responsibly. It indicates that you will likely be a low-risk borrower, which is a priority for many lenders.

Even if a large lump sum of money magically appears in your bank account two weeks before you submit your home loan application, it doesn’t tell the lender much about you. They want to know that you’ll be able to responsibly handle a major financial commitment like a mortgage.

Banks will be particularly wary of lending to those borrowing over 80% of the purchase price who don’t have sufficient genuine savings. This is because Lenders Mortgage Insurance (LMI) will be charged and they may be held accountable by insurance providers.

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What is counted as genuine savings?

ig-graphic-what-counts-as-genuine-savings Lenders can have different policies about what they regard as genuine and non-genuine savings, so it’s a good idea to speak to a mortgage broker or the bank directly to learn more.

However, there are are a few things that may be counted as genuine savings:

  1. Money held or saved up over at least three months
  2. Managed funds and shares that you have held for at least three months
  3. Term deposits held for at least three months
  4. First Home Super Saver Scheme contributions
  5. Equity held in an existing property
  6. Profits from the sale of a property

Remember that what one lender considers genuine savings, another lender might consider non-genuine savings. Home equity held in an existing property is a good example of this.

Make sure you keep track of documentation like bank statements to submit as proof of genuine savings.

Does rent count as genuine savings?

Some lenders will consider your rental payments as proof of your capacity to repay a loan, usually in lieu of typical genuine savings. It’s generally better not to rely on rent paid as a substitute for genuine savings as not all lenders will allow this.

Some lenders will even consider consistent, extra repayments towards a personal loan, for example, as a substitute for genuine savings.

What doesn’t count as genuine savings?

Some home buyers will still have savings, even if they haven’t been accumulated in the same way genuine savings are. Typically, non-genuine savings are lump sums of money you have received through a gift or other way.

Non-genuine savings may include things like:

  1. Inheritance
  2. Gifts
  3. Work bonuses
  4. Short-term savings (i.e. money saved over less than 3 months)
  5. Profits from the sale of a car, or other non-property asset
  6. First Home Owners Grant
  7. Borrowed money
  8. Tax refund
  9. Equity held in an existing property (varies between lenders)

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Can you get a home loan without genuine savings?

You may be able to still be approved for a home loan even if you don’t have sufficient genuine savings. While you may have options, you will need to come up with a deposit of at least 5% (ideally more) which can come from other non-genuine sources. For borrowers with no deposit, a guarantor loan may be an option to consider.

Speak to a mortgage broker or Lendi Home Loan Specialist for guidance on finding a mortgage that suits your unique situation.

How do I grow my genuine savings?

Growing your genuine savings requires consistent, long term effort. At least three months prior to your home loan application, you need to start accumulating savings. It’s a good idea to divert a fixed amount of money from your paycheck into a savings account each month. Most banks will usually allow you to set up an automatic transfer.

There are lots of great budgeting and savings tips out there, and it’s all about figuring out what works best for you and what you can actually stick with. Not sure where to start? Check out some of our articles on how to save up for a home loan deposit:

Got a home loan question? Just ask!

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The information in this post is general in nature and should not be considered personal or financial advice. You should always seek professional advice or assistance before making any financial decisions.

Tags: new purchase, home loan, refinance, lender, deposit, low deposit, no deposit home loan, guarantor, genuine savings, saving

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# Quoted rate applies only to PAYG loans with LVR of 80% or less with security in non-remote areas. All applications are subject to assessment and lender approval.
Lendi is a privately owned and operated Australian business. Our mission is to change the way Australians get home loans by providing a faster, smarter and more secure home loan experience designed around the customer’s convenience and needs. Although Lendi compares over 1600 products (2,500+ products including feature and pricing variations) from more than 25 lenders, we don't cover the whole market or compare all features and there may be other features or options available to you. Lendi Group Pty Ltd, which is the ultimate holding company of the Aussie and Lendi businesses is owned by numerous shareholders including; banks such as CBA, 1835i (ANZ’s external venture capital partner) and Macquarie Bank, the Lendi founders and employees, and a number of Australian institutional investors and sophisticated investors including UniSuper.
*WARNING: This comparison rate is true only for the example given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. The comparison rates are based on a loan amount of $150,000 over a loan term of 25 years. Fees and charges apply. All applications are subject to assessment and lender approval. Quoted rate applies only to PAYG loans with LVR of 80% or less with security in non-remote areas. All applications are subject to assessment and lender approval.
IMPORTANT INFORMATION: Loan terms of between 1 Year and 40 Years are available subject to lender and credit criteria. Maximum comparison rate will not exceed 14.99% (see comparison rate warning above). Any calculations or estimated savings do not constitute an offer of credit or a credit quote and are only an estimate of what you may be able to achieve based on the accuracy of the information provided. It doesn't take into account any product features or any applicable fees. Our lending criteria and the basis upon which we assess what you can afford may change at any time without notice. Savings shown are based on user inputted data and a loan term of 30 years. All applications for credit are subject to lender credit approval criteria. Top rates include lenders who are on our panel and are then defined by the circumstances provided by the borrower.
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