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Genuine SavinGS
What Is It?
It’s a term used by lenders to describe the funds you have gradually saved over a period of
time (3months in most cases). This is generally required when you borrow above 80% of
the purchase price ( case by case with different banks.)
Genuine savings indicates that you’ve planned and saved money gradually, which is what
lenders want to see as they view this as a sign of a good borrower which increases your
chances of loan approvals.
Precisely labeling genuine savings is challenging, and, in the end, it’ll depend on your
lender’s criteria. However, in most cases, genuine savings consist of the following:
Equity in your current property
Managed funds or shares that you’ve possessed for a minimum period of three
Funds salary waived under FHSSS (First Home Super Saver Scheme)
Term deposits exceeding terms of three months.
Savings that you’ve held for three months or more
If you rent, providing a good rental ledger is also considered.
Why Are Genuine Savings Important?
Lenders need to carry out their due diligence to ensure customers are capable of making
timely repayments. Generally borrowing above 80% of the value of the property is
categorized as a high-risk borrower. If you possess a higher deposit, you’ll be deemed as a
more attractive customer.
As a result, lenders will examine your account and spending and look into:
What you spend your money on (most lenders frown upon heavy gambling)
The amount of debt you owe
How your spending compares to your income
The amount of money you spent in a week or month
Having genuine savings will earn your lender’s trust and boost your chances of a home loan
Regular And Genuine Savings: What’s The difference?
In simple words, genuine savings aren’t conventional savings. It can be money that you use
to invest or money that you’ve saved elsewhere. To be labeled as genuine savings, you’ll
have to maintain them. If you terminate your term deposit early or withdraw a huge
amount from your savings account, they might not be considered as genuine savings.
What Are Not Considered As Genuine Savings?
As mentioned above, simply possessing money doesn’t mean you have genuine savings if it
hasn’t sat in your account for more than 3 months. The following wont be considered as
genuine savings:
First homeowners’ grant
Work bonuses
Tax refunds
Asset sales
Inheritances or gifts
The money you hold in your business account
Money that you might have borrowed from someone else
A lump sum deposit (However, this can vary according to the lender)
However, there can be exceptions depending on your lenders’ criteria. For instance, in
some cases, your inheritances or savings can be taken as genuine savings if the
executor/gift giver provides you with a letter.
Will I Still Need A Deposit?
Yes, a deposit will still be needed. At the initial stages of your loan application, you’ll need
to prove these funds. Generally, a minimum of 5% of your property’s purchase price is
required and is also dependent on your loan’s LVR.