Why do banks require genuine savings?The banks want to see that you’ve planned and saved a deposit yourself because this shows to them that you’re likely to be a good borrower. Show
Having money in your savings account isn’t enough! What is and isn’t considered to be genuine savings is very complicated! In addition to this, each lender has its own genuine savings policies! You can use our genuine savings calculator to find out how much you need to prove in genuine savings. It can also tell you whether it will be accepted by the bank. How much do I need?Lenders typically ask for a minimum of 5% of the purchase price. The rest of your deposit can come from anywhere you like. For example, if you were buying a home for $500,000, then you’d need $25,000 in genuine savings. Is a deposit paid to a builder genuine savings?A deposit paid to a builder, developer or real estate agent is considered genuine savings by some lenders as long as the:
This is common for off the plan properties where you may have paid the deposit over a year ago but the lender will ask you to prove another 5% of the property value as genuine savings at settlement. Thankfully you can apply with a lender that has a more reasonable approach. Please call us on 1300 889 743 or enquire online and one of our mortgage brokers will work out the best options for you. No genuine savings home loanLenders that don’t require genuine savingsNo genuine savings home loans are available if you choose the right lender:
There are other specific crtieria you need to meet so please check out the no genuine savings home loan page for more information. Please contact us on 1300 889 743 or complete our free assessment form to find out more. Some lenders specialise in non genuine savings home loans and we know who they are! Get Enrolled For TheHome Buyers ProgramThinking of buying a home? Learn how to buy a house and avoid costly mistakes in under 2 hours. Rent as genuine savingsIf you can prove a strong rental history, some lenders will make an exception to their normal genuine savings policy and may consider other deposit sources such as a gift from your parents. Renting for 3 months or moreYou generally need to meet the following criteria:
If you meet the above criteria, the rent that you paid over the last 3 months will be considered in lieu of genuine savings with one of our lenders. Any deposit source will be acceptable with one of our lenders. Please call us on 1300 889 743 to discuss your situation and we can you help confirm whether you’re eligible for a 95% home loan. We’ll need your property manager to complete a rental reference letter (we can provide the template) and/or a tenant ledger to assess your home loan. Other no genuine savings optionsThe following deposit types can also be considered as genuine savings but you must be able to prove that your rental payments have been made on time for a minimum of three months:
Is it really that easy for renters?Not necessarily. Banks are stricter in their assessment if there isn’t standard genuine savings in a bank account.
Our mortgage brokers are specialists in the genuine savings policies used by the banks and have access to home loans that don’t require any genuine savings at all! Do I still need a deposit?Yes, you’ll still be required to provide a deposit or what the banks call “funds to complete”. You’ll need to prove these funds at the time of your initial loan application. The amount required would ordinarily be a minimum of 5% of the purchase price (depending on the LVR of your loan). This percentage varies depending on the state in which you’re purchasing and whether or not you’re a first home buyer as grants and stamp duty exemptions need to be considered. If you don’t have a deposit but you have a guarantor, we can lend you the full purchase price plus costs! What other restrictions apply?In order to get approved with a lender that doesn’t require genuine savings, there are certain restrictions that may apply. If you have no genuine savings or you’re not sure, speak with us first before applying with a bank directly. Although some lenders specialise in no genuine savings, the tradeoff is that they tighten other lending rules. As a general rule:
Don’t meet the above policy? Call us on 1300 889 743 as we may have other options available. Genuine savings policies are complicated and there is no one size fits-all solution. Why are genuine savings policies so strict?Those that don’t work in the mortgage industry are often surprised at just how strict lenders are with their genuine savings policies. For example, if you wished to buy a property for $300,000 you may need to prove $15,000 (5%) in savings. If you only had $14,000 saved and the remaining $1,000 came from another source, then your loan will be automatically declined with some lenders. The reason they’re so strict with genuine savings is due to their Lenders Mortgage Insurance (LMI) providers. Loans that are for over 80% of the property value are insured by an external company. This reduces the risk to the lender in the event that you can’t repay the loan. If a lender has to make a claim on a mortgage insurance policy as a result of a customer not paying their loan, then the mortgage insurer will audit the original approval. If they see that the lender didn’t have evidence of exactly 5% or more in genuine savings when they approved your loan, then they won’t pay the insurance claim! Example of non-genuine savings or irregular savings habbitsThe following are examples of savings evidence that may be seen as a red flag with most lenders. However, some lenders may still consider the following so speak to us first if you don’t think you quite meet standard genuine savings policy.
How can I make my savings count?The secret to getting approval is to apply with a lender that will accept your situation as part of their normal policy. You can find out how the banks will view your situation by using our genuine savings calculator. Common TrapsWhere did the deposit come from?When you’re saving money to buy a home, it’s unlikely that you’re thinking about the lender’s policy and how you should structure your savings so it passes their test. Below are some examples of savings sources that may not be acceptable to the lender:
Not sure whether or not your savings are “genuine”? Please fill in our free assessment form or call 1300 889 743 and one of our brokers will give you the answers you need. Where are your savings held?Did you know that a lot of people who have saved a deposit themselves still get declined? It’s usually because they don’t keep the savings in their own bank account.
There are other types of savings that may be accepted as genuine savings as long as you can provide a trail of documents showing where the funds originated. This includes:
Bank will analyse your savingsThe bank is going to look through your savings and analyse the way that you’re managing your money.
Common deposit sourcesMore than 80% of first home buyers say that the biggest barrier to buying a first home is saving for a deposit. That’s according to Genworth’s March 2016 Sreets Ahead report which also found that more first home buyers than ever find it unreasonable to require a 20% deposit to buy a property. Since 2009, the proportion of first home buyers that have used savings as part of their deposit has decreased from 72% to 44%. Today, around 66% of first home buyers use sources other than their own savings. More often than not, these alternative deposit sources are gifts from parents and credit cards. How do millennials spend their money?Australians under the age of 30 are spending way before their means, a 2016 report by Veda Advantage (now acquired by Equifax) found. The credit reporting agency found the main reason for overspending was due to the fact that millennials are increasingly more comfortable with credit than the previous generation. In a similar report, JPMorgan defined millennials as being born between 1981 and 1997, while non-millennials are those born prior to 1981. It was found that millennials spend a lot more on “experiences” compared to non-millennials. For example, 16% of overall credit spending was spent on dining compared to 11% for non-millennials, and 12% on entertainment compared to 10% for non-millennials. Overall, 34% of millennials’ total credit spending was on experience items and services compared to 28% for non-millennials. This means less money is being put aside for saving or buying assets such as real estate. Essential tips for saving
Of course, the best thing you can do is speak with a financial planner to work out the best savings and budgeting strategy for you. Apply for a home loanWe have mortgage brokers with extensive experience in financing property purchases for people who don’t have genuine savings. We can tell you if your deposit will be considered as genuine savings, whether you can use your rental history or whether you can qualify for a loan without genuine savings. Please call us on 1300 889 743 or complete our free assessment form today! |