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The ultimate guide to genuine savings

Photo by: Sandy Millar from Unsplash.

If you’re trying to save for a home loan, you may have heard of genuine savings and how you need them for a home loan. And while you may have thought genuine savings are just your bank account balance, it’s not quite that simple. Providing evidence of genuine savings is an important step in getting your home loan application approved. So, there’s never been a better time to get on top of them.

In this article, we’ll be answering the question “What are genuine savings?” and explaining what is and isn’t considered to be genuine savings for a home loan. We’ll also take a look at the options you have when you don’t have a genuine saving. Also, what your next steps are on your home buying journey in this article:

  • What are genuine savings and why do I need them?
  • What are genuine savings and what aren’t?
  • What if I don’t have genuine savings?
  • What are my next steps?

What are genuine savings?

Genuine savings are the savings you as a borrower have accumulated gradually on your own. These are the funds that have been sitting in your name for an extended period of time (at least 3 months) without being spent or lent.

Lenders ask for proof of genuine savings to determine whether you have good savings habits in place. This will help them determine whether you are capable of paying back a home loan. This is definitely a major factor in whether your home loan application is approved or rejected.

Although amounts and requirements vary between lenders, most lenders usually expect borrowers to have at least 5% of their property’s purchase price in genuine savings.

What are genuine savings and what aren’t?

Genuine savings are:

  • Savings that have remained within your account for at least three months
  • Term deposits that have remained untouched for at least three months
  • Shares or managed funds that you’ve held for at least three months
  • A cash gift you have held for at least three months
  • Inheritance or similar funds you have held for at least three months
  • Voluntary super contributions as part of the First Home Super Saver Scheme

Genuine savings aren’t:

  • Tax refunds
  • A work bonus
  • Monetary gifts
  • An inheritance (conditions apply)
  • Profits made from the sale of an asset that isn’t a property (e.g., a car)
  • Funds you’ve borrowed
  • Short term savings (less than 3 months)
  • The First Home Owner Grant cash payment

What do I do if I don’t have genuine savings?

If you don’t have any or very little genuine savings, you still have some options when looking for a home loan:

Use your rental payment history

If you’re currently a tenant, some lenders may allow you to use your rental payment history as proof that you’ll be able to make the monthly repayments on your home loan.

It’s important to do your research to ensure the lender you’re applying to will accept your rental payment history as proof you can make your repayments. Speaking to a broker can also help you determine your eligibility. And it’s free!

Want to know how much your monthly loan repayments will be? Check out our loan repayment calculator for an estimate of how much you’ll be paying.

Get a guarantor

If your close family are willing and able, they can become a guarantor on your loan. This means that they use their house or another asset as security on your loan in the event that you are unable to make your home loan repayments. This option can also help you avoid paying Lender’s Mortgage Insurance (LMI), as the equity on your guarantor’s home can help you form a 20% deposit.

Getting and being a guarantor is a big commitment for everyone involved. If you’re looking at getting or becoming a guarantor, we recommend you and your guarantor seek professional legal and financial advice to ensure it’s the best option for both of you. If you’re still unsure about getting a guarantor, read out guide on everything you need to know about family guarantee loans and our tips for getting a guarantor and becoming a guarantor.

Find a loan that doesn’t require genuine savings

Some lenders offer loans that don’t require proof of genuine savings for applicants to be accepted. These lenders usually require proof of stable income and employment and a strong record of paying bills on time. They also usually require a 5% deposit, so ensuring you have this amount ready is important.

For more information about these kinds of loans, do your research into loans without genuine savings or get in touch with a broker.

What are my next steps?

Saving for a home loan can be a long and tricky process. If you’re struggling to make sense of your options or meet the deposit requirements for the home loan you’re after, you may need a helping hand to

That’s where we come in.

As an experienced ethical mortgage broker, we can help you research and compare loans from over 30 lenders so you can be confident you’re accessing the best deals on the market. We can help you check your eligibility, prepare your application and communicate with banks, so you can save time and focus on what matters. And when you secure a home loan through us, we’ll invest up to 50% of our profits into charity work addressing housing security in Australia and the Asia Pacific.

So, for free, personalised and expert advice, send us a quick message and we’ll answer all your burning questions, anytime, anywhere.

Disclaimer: The information provided is general in nature and does not constitute financial advice. Please speak to us for recommendations on your individual circumstance and requirements.