Which of my savings can be considered genuine?

Any general questions you might have in regards to loans and finance.
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Otto Dargan
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Re: Which of my savings can be considered genuine?

Post by Otto Dargan »

Hi and welcome to the forums adele.

Each lender may have a different genuine savings policy.

Here are some of the savings that most lenders consider genuine:
  • Savings accumulated over the past three months.
  • Term deposits held over three months.
  • Equity in real estate.
  • Shares or managed funds held for three months.
It should be noted that some lenders may consider rent as genuine savings only if:
  • You are currently renting.
  • You have not missed your rent payments for a minimum of last six months.
  • You are renting through a licensed property manager. However, if you are renting privately, then the lender may decide on whether to accept your rent as genuine savings only after looking at your case.
  • The tenants on the lease are the same as borrowers.
Please note that you may need to submit a rental reference letter or a tenant ledger as evidence.

It should be noted that lenders typically ask for a minimum of 5% of the purchase price in genuine savings. It also depends upon the loan to value ratio (LVR) you are aiming for. If you seek to borrow at:
  • 80% LVR: You may require no genuine savings.
  • 85% LVR: Most lenders may ask for genuine savings.
  • 90% LVR: Most lenders may require genuine savings.
  • 95% LVR: Almost all lenders seek genuine savings.
  • 100% LVR: Genuine savings is not required, however, you must have a guarantor.
Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

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Otto Dargan
Mortgage Specialist
Posts: 7730
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
Contact:

Re: Which of my savings can be considered genuine?

Post by Otto Dargan »

Hi adele,

Normally, lenders may not consider the following as genuine savings:
  • Gifts.
  • Inheritance.
  • Savings plans.
  • Tax refunds.
  • Lump sum deposits.
  • Bonuses.
  • Selling your car or other assets.
  • First Home Owners Grant (FHOG).
  • Funds held in a business account.
  • Any borrowed funds, for example, a personal loan.
  • Developer’s or builder’s rebates.
However, it should be noted that there may be many exceptions to the above, particularly if you have been renting for the past three to six months.

You can check out our website for more information on genuine savings. If you want to talk to one of our brokers directly, then you can call us on 1300 889 743 or fill in our free assessment form and we will contact you instead.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

User avatar
Otto Dargan
Mortgage Specialist
Posts: 7730
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
Contact:

Re: Which of my savings can be considered genuine?

Post by Otto Dargan »

Hi ladygaga,

Lenders have strict policies regarding genuine savings because of their Lenders Mortgage Insurance (LMI) providers. Loans with an LVR higher than 80% are insured by an external company. If a borrower does not pay his/her loan, then the lender files a claim on the mortgage insurance with the LMI provider.

The LMI provider then audits the documents of the original loan approval. If they find that the lender does not have evidence of 5% or more in genuine savings, then the claim for insurance will be void. This is the reason why lenders usually do not make exceptions to their genuine savings policy.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

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