The way you save is more important than ever before. If you're borrowing above 80% of a purchase price, you may have to prove you have ‘genuinely’ saved 5% over a set period of time.
Genuine Savings Explained
The focus on responsible lending is more strenuous than ever before, so demonstrating your capacity to meet proposed home loan repayments is the key to a successful finance application.
What are genuine savings?
Genuine savings are viewed as the consistent growth in your savings over a period of time, accumulated from funds that derive from a legitimate income source. Some lenders will even require the equivalent of your proposed mortgage repayments to be evidenced through your savings over a set period.
Genuine savings should be:
- held in your name, or in a co-borrowers name in a bank account or similar
- accumulated over at least a 3 month period
- evidenced clearly via documents such as bank account statements with all identifiers
What isn’t included as genuine savings?
Any of following are usually not considered to be ‘genuine’ savings:
- a cash gift
- an inheritance
- casino/other gambling winnings
- proceeds of the sale of a non-investment asset
- government grants and other finance offered as incentives
Can I obtain finance without genuine savings?
Even without genuine savings there are solutions available, depending on your situation. These could include:
- Family guarantee loans - Having a family guarantor on your loan could mean that no deposit is required, with the equity in your guarantor’s home, replacing the requirement for a deposit.
- Shares, term deposits and/or equity in residential property - Cash isn’t the only thing accepted as genuine savings, you could replace the need for a cash deposit through using equity in another property you own, or funds held in a term deposit account.
- Rental History - Some lenders could waive genuine savings requirements if you can demonstrate a history of meeting rental payments on time and in full over a preceding 12 month period. Usually this would have to be evidenced through a document provided by your property manager or landlord. It could be used in conjunction with other savings accumulated.
As every lender has different lending requirements, it is best to discuss your situation and goals with a Mortgage Broker to plan how to successfully obtain finance approval to assist with purchasing your home. Speak with a Bernie Lewis Home Loans Mortgage Broker today on 8300 8300.
The information provided in this article is general in nature and does not take into account your personal circumstances. Since everyone's personal situation is different, this article should not be taken as advice.