Applications for a home loan greater than 90% of the value of the property require you to prove to the lender that the funds you are contributing are classed as ‘genuine savings’. This policy is in place so the bank has confidence you are able to save funds and be financially disciplined over a prolonged period of time.
Classification of what makes up ‘genuine savings’ can be confusing with lenders having different policies or hurdles in place for you to clear before approval can be issued to you.
Examples of what may be considered as genuine savings:
- Personal savings or funds held in an account or accumulated for three months or more
- Equity in an existing residential property with ownership evidenced by a rates notice
- Term deposits held greater than three months
- Shares or managed funds held greater than three months
- Work bonuses or commissions evidenced with income verification requirement
What isn’t considered as genuine savings:
- Gifts or inheritance. (Inheritance can be classified in some instances where they have been held in the borrower’s account for a period of time, typically three months or more).
- First home Owner’s Grant/Government Grants
- Funds held in company or business accounts
- Personal loans
- Winnings such as casino or gambling proceeds
How do I get a loan without genuine savings?
- Rental payments/history over the last 3 months may be used in some instances to mitigate a borrower who cannot demonstrate accumulated funds in a savings account over a period of less than three months. The banks recognise that the commitment to paying your rent is showing financial discipline
- Sale of assets other than those listed above may be considered as genuine savings
- If your available deposit is 20% or more and in your own bank account, then most banks do not require you to demonstrate how those funds have been saved
The ever-changing landscape of lender policy can make the application for a loan confusing and complex. The Genuine Savings policy is just one of a range of policies that can determine which lender is going to be right for you.
If you are unsure about lender requirements when applying for a loan then be sure to get a in contact with the team at 40 Forty Finance to be fully aware of the process of home loan lending.