Genuine Savings: What You Need to Know Before Buying a Home
If you’re looking to buy a home, you might have come across the term “genuine savings.” Lenders consider This crucial factor when deciding whether to approve your home loan application. So, what exactly are genuine savings, and why do they matter?
Defining Genuine Savings
Genuine savings refer to money you’ve personally saved over time. Usually, this means holding the funds in a savings account for at least three months. Most lenders require a minimum of 5% of the property purchase price to be demonstrated as genuine savings.
Why Genuine Savings are Important
When you have a substantial deposit, a lender might need evidence of genuine savings if your loan-to-value ratio (LVR) exceeds 80% (meaning you’re borrowing more than 80% of the property’s value). Some lenders have stricter thresholds and require proof of savings at LVRs above 90%.
Genuine savings demonstrate to the lender that you have financial discipline, can manage your money and are likely to repay your mortgage on time.
Things to Keep in Mind
- Not All Deposits Qualify: Deposits made using a credit card or personal loan don’t count as genuine savings.
- Land and Build Deposits: If you’ve paid a deposit for a land and build package in advance, the lender may still want to see three months of bank statements, even if the deposit was made before that period.
- Gifted Deposits: While gifts can help with your deposit, simply having the gifted funds in your account for three months might not be enough. Lenders often want to see growth in your savings over that time.
- Rental Ledgers: Some lenders may consider a rental ledger showing 6-12 months of consistent on-time payments as an alternative to traditional genuine savings.
You First Finance: Your Guide to Homeownership
Navigating genuine savings requirements can be tricky and different lenders have varying policies. At You First Finance, we help you understand the complexities of home loans and ensure you’re financially prepared for the purchase.
Contact us to find out how we can support you in your homeownership journey.
