What is genuine savings?

When it comes to applying for a first home buyer loan, lenders will want to see that you have a certain amount of money saved to put towards a home loan deposit. This is known as genuine savings. The more genuine savings you have, the more likely you are to get approval from a lender as it’s solid proof you have savings for a mortgage, are responsible with your money and are not a big risk for them to lend to.

What counts as genuine savings?

Genuine savings is a term used in the home loan industry. It refers to real savings held in your name for at least three months or preferably a year. This can’t be money borrowed from Mum or a bonus from work, but rather accumulated money that shows you are continuing to save and grow your savings. Some examples of genuine savings are:

  • Savings in a savings account held for more than three months
  • Term deposits held for more than three months
  • Managed funds and shares held for more than three months
  • First Home Super Saver Scheme (FHSS)
  • Equity in residential property from previous purchases

Most lenders are prepared to consider how good your rental history is and some consider your rental payments as genuine savings generally from a 12 to 24-month period.

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What isn’t considered genuine savings?

Any money that is dependent on someone else’s finances or a one-off occurrence isn’t considered genuine savings because it doesn’t prove you have good saving habits, which is what all lenders want to see before they feel comfortable lending to you. Examples of one-off occurrences that don’t impress lenders include:

  • Inheritance or gifts
  • Tax return
  • Work bonuses
  • Money from selling a depreciating asset, such as a car
  • Loan from family or friends
  • Any money you have in a business account
  • First Home Owners Grant (FHOG)
  • Other grants or bursaries

Why does it matter?

Many lenders can be pretty strict on you needing genuine savings because of Lenders Mortgage Insurance (LMI). LMI protects lenders from those who may be at a higher risk of defaulting on their loan repayments and those that have a deposit of less than 20%. In the event a borrower defaults, the LMI provider will look for evidence of genuine savings of at least 5% before compensating the lender. If no genuine savings are found, the provider will likely not pay the lender.

Can I get a loan without genuine savings?

If you don’t have genuine savings, it’s not impossible to get a home loan. Some loans will allow you to borrow but will require you to be backed up by a guarantor. There are lenders out there though that take a stable job and income plus a good history of paying bills on time as enough. The best thing to do is speak with a mortgage broker as every lender has a different set of requirements and you may find you are indeed eligible.

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