What are genuine savings?

Happy coupleIn recent times many Australian lenders introduced a mandatory genuine savings policy for all loan applications to purchase a property. This was in response to the increased number of first home buyers with no deposit and no savings applying for home loans.

So how does this affect your ability to borrow money to buy a property?

What is the new policy?

Lending policy differs between the banks, however almost all lenders have adopted one of the below policies:

  • 3% of the purchase price is required to be genuinely saved for all loans used to purchase a property, available to first home buyers only and from one lender only.
  • 5% of the purchase price is required to be genuinely saved for all loans used to purchase a property.
  • 5% of the purchase price is required to be genuinely saved for all loans used to purchase a property where the loan amount exceeds 80% or 85% of the purchase price.
  • No genuine savings is required for loans up to 90% of the property value.

What is considered to be genuine savings?

The following types of savings are considered to be genuine savings if they add up to be more than 5% of the purchase price:

  • Savings held or accumulated over 3 months
  • Term deposits held for 3 months
  • Shares or managed funds held for 3 months
  • Equity in real estate (varies depending on the lender)

Note that large one off deposits and future savings plans are not considered to be genuine savings by the banks.

What if I do not have genuine savings?

If you cannot prove that you have a saved your deposit then you should consider applying for a no savings home loan. You will still need a deposit, however it can come from almost any source rather than just savings that you have accumulated.

Apply for a home loan

Here at the Home Loan Experts we have mortgage brokers that have extensive experience in financing property purchases. Please contact us to discuss your situation with a mortgage broker.