What Is Genuine Savings?
Genuine savings is a term used to define funds that a borrower has saved themselves over time, usually over the course of at least three months.
Did you know that you can turn any deposit into genuine savings by simply waiting three months? Turning your deposit into genuine savings is as simple as putting the funds into a savings account, adding to them each month for three months and then ‘Voila!’, it is considered genuine savings.
This does not apply to a borrowed deposit.
Genuine Savings Calculator
You can use our genuine savings calculator to work out how much genuine savings is required and what sources of funds lenders accept as genuine savings.
Check if you meet the requirements for Genuine Savings
What Is Accepted As Genuine Savings?
- Savings held or accumulated in your account for at least three months
- Equity from an existing property
- Dividend or bonus held for three months
- Historical rental payments
Some lenders consider gifts, inheritance or even deposits paid to builders as genuine savings if it’s been in your account for at least three months. We’ve explained some of these scenarios below.
What Is Not Accepted As Genuine Savings?
- Government grants like FHOG
- Proposed savings or rental-purchase plan
- Savings not held in your account
- Windfall proceeds
Why Do Banks Require Genuine Savings?
Banks view genuine savings as a sign that you are a good borrower. Lenders want to see that you’ve planned and saved for a deposit yourself and are not reliant on other sources.
What is and isn’t considered genuine savings is complicated. Each lender has its own policies.
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:
- Deposit has been held by the Builder, Developer or Real Estate Agent for more than 3 months.
- Deposit wasn’t borrowed and we can prove that it was in your bank account prior to you paying your deposit.
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.
Can I Get A Home Loan With No Genuine Savings?
Yes, you can. In the following section, we’ve explained several ways you can get a home loan even with no genuine savings.
Choose Lenders That Don’t Require Genuine Savings
No genuine savings home loans are available if you choose the right lender:
- You can borrow up to 95% of the property value.
- Interest rates are often the same as those for a regular loan.
- Ideally, you should have a good asset position, income and employment stability.
- You will still need a deposit; however it can come from almost any source.
- If you have no deposit at all then consider a guarantor loan.
There are other specific criteria on which your application will be assessed so please check out ourno genuine savings home loan page for more information.
Please contact us at 1300 889 743 or complete our free online assessment form to find out more.
Using Rent As Genuine Savings
If you can prove a strong rental payment history, some lenders will make an exception to their normal genuine savings policy.
You generally need to meet the following criteria:
- You’re currently renting.
- Most lenders prefer a minimum of 12 months of rental history but some lenders will consider three months of rent paid on time, every time.
- You are renting privately or via a licensed property manager (private rentals are case by case).
- The tenants on the lease must be the same as the borrowers on the home loan application.
If you meet the above criteria, the rent you paid over the last three months will be considered in lieu of genuine savings with one of our lenders.
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. For more on this, read our page on ‘Rent As Genuine Savings.’
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.
- Only a select few lenders make exceptions to genuine savings criteria for renters.
- The banks sometimes have very conservative credit scoring for those using rent as genuine savings.
- Most banks won’t accept a private lease or a leasing from a family member.
- Some banks will complete a ‘capacity test’ or will require that you have 1% to 2% genuine savings.
- Your rent may be considered as genuine savings, but you’ll still need to come up with a deposit to complete the purchase.
Other No Genuine Savings Options
The following deposit types can 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:
- Gift: The gift must be in your account and a gift letter must be provided by your parents to confirm that the gift isn’t a loan.
- Bonus/Dividend/Commission payment: Provide a payslip evidencing payment and bank account statements.
- Inheritance: Provide a letter from the executor confirming the amount and date that the funds will be received.
- Non-real estate asset sale: Provide evidence confirming the details of the asset that you sold. In most cases, this is from the sale of a motor vehicle.
- Tax refunds: Provide a copy of your Notice of Assessment.
Do I Still Need A Deposit For A No Genuine Savings Home Loan?
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?
To get approved with a lender that doesn’t require genuine savings, certain restrictions may apply.
As a general rule:
- No genuine savings home loans are usually available only for buying a home to live in, not for investment.
- Not available when purchasing vacant land or constructing.
- Max land size with most lenders is 2.2ha.
- Properties in small towns or remote areas may not be considered.
- The ratio of your net disposable income to your total debts should be at least 110%.
- You’ll be able to borrow only up to 95% of the property value up to $650,000 as opposed to $1 million if you had genuine savings.
Don’t meet the above requirements? 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.
Non-genuine savings are funds that you received recently through sources like inheritance, gifts or personal loans. You did not save this money and it has not been in your account for at least three months. Using these sources for your deposit may indicate to the lender that the borrower does not have a good saving habit.
Here are some examples of non-genuine savings:
- Lump sum deposit: You’ll see in this document (circled in red) a lump sum deposit of $8,171.55 deposited on 30 June.
- Fluctuating savings: You’ll notice that this person’s spending habits are a little out of control which is a sign that they may not be able to manage their mortgage repayments. Their savings balance isn’t really increasing and is being hindered by spending habits.
- Personal loan statement: Personal loans simply aren’t a good reflection of your character and capacity to save. Only a few lenders will accept this as your deposit. If you apply for a personal loan and then put the funds into a bank account for three months, this won’t qualify as genuine savings. This will also lower your credit score.
- Gift held for three months: A gift from your parents is only acceptable if you’ve held it for at least three months and can provide an accompanying gift letter explaining that the funds won’t have to be paid back.
- Redraw facility: This is unacceptable as genuine savings.
- First Home OwnerGrant (FHOG): Government grants like FHOG are not genuine savings.
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 by 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!
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.
Genuine Savings Mistakes To Avoid
Understand Where You Held Your Savings
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. Here are some common mistakes:
- Savings in a friend/family members account: It’s common in Asian families for people to keep their savings in the account of a family member or friend. You can actually still borrow up to 90% with some lenders.
- Loan from a friend/family member: Most lenders don’t consider this to be genuine savings but we can help you to borrow up to 90% of the property value!
- Savings in an overseas account: Recent migrants to Australia, particularly those on a 457 visa, tend to keep some of their savings overseas. We know lenders that will allow you to borrow up to 90% of the property value using this as genuine savings.
- Savings in joint names: Some banks won’t consider savings held in a joint bank account in situations where one person is buying the property on their own. However, we have lenders that may allow you to borrow up to 90% of the property value.
- Savings transferred from another account: This is acceptable as long as the names of each account match your name and your statements show that regular deposits have been contributed over a period of 3 months to the originating 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.
- Savings held in a trust account
- Savings held in a company name
- Savings in the account of a marital partner (as long as they’re a co-borrower).
- Savings in the account of a de facto partner (as long as they’re a co-borrower).
Understand How A Bank Analyses Your Savings
The bank is going to look through your savings and analyse the way that you’re managing your money.
- Savings not growing: Some lenders have a policy that only savings that are added to regularly are considered to be genuine savings. Having a lump sum in an account is not often accepted. However, we have lenders that can consider lump sums as long as they’ve been held for over 3 months.
- Lump-sum deposits: People who receive commission income, bonuses or who have sold an asset such as a car often make their savings in irregular lump sum deposits. Unfortunately, lenders don’t view this as genuine savings because it doesn’t show that you have the ability to save on a regular basis. We have lenders that can consider this as genuine savings for a loan of up to 90% of the property value!
- Savings in redraw: Many people save by making extra repayments on a loan they have and then redraw these funds when they need to make a purchase. Whilst this is the most financially responsible way to save, many lenders don’t consider this to be genuine savings. We know lenders that will consider savings in a loan account!
- Your spending: Any transactions shown in your savings account will be checked against the information provided in your application. The bank is looking for undisclosed debts, other expenses or dependents.
How To Improve Proof Of Savings For A Home Loan
- Write down your budget and get buy-in from your partner: In that way, you can support each other.
- Avoid emotional spending: A lot of us do it so replace it with an activity that doesn’t cost you anything.
- Write a weekly menu and stick to it: Sounds simple but you can save literally thousands of dollars a year.
- Ask for discounts on everything: If you’ve been a loyal customer of your phone company or even your bank, ask for a discount including on your interest rate.
- Sell old items and clothing online: You may not use it anymore but that item collecting dust in your garage may be worth something to someone else.
- Repair appliances instead of buying brand new: It costs a lot less to keep things in working order than buying brand new appliances and machinery for the house.
- Cancel old credit cards and memberships: You can save hundreds every year and clean out your wallet in the process.
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.
Take The Help Of The Experts
We 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 genuine savings, whether you can use your rental history and whether you can qualify for a loan without genuine savings.
Please call us on 1300 889 743 or complete our free online assessment form today!