Home Loan Rate – Australia

What are genuine savings?

The majority of Australian lenders have a policy requiring you to have “genuine savings” before they will approve your mortgage. In effect, it is proof of your ability to manage your money effectively and live within your means.

Genuine savings is not necessarily money saved in a savings account, it can come in many forms and each lender has their own policies regarding what is and what is not genuine savings. As a general rule if you are borrowing over 80% LVR then you need to prove 5% of the purchase price as genuine savings.

Common genuine savings types

These types of genuine savings are regularly accepted by most major lenders:

• Savings that have been made or held in an account for three months or more (including First Home Saver Accounts).
• Shares or managed funds that have been held for three months or more.
• Term deposits that have been held for three months or more.

Ideally your savings should be held in a separate account to your day to day spending and the balance of your account should be increasing over the three month period. Any large lump sum deposits during the three month period will not be considered as genuine savings.

What is not genuine savings?

The deposit for your new home can come from many different sources. The vast majority of sources that do not involve you saving the money yourself will not be considered as genuine savings. Some examples of deposit types that are not accepted as genuine savings are:

• Financial contributions from your family or parents (e.g. gifts / loans).
• Loan from a friend.
• Personal loans / cash out from credit cards.
• Vendor / builder rebates, cashbacks or discounts.
• Pay in advance from your work.
• Money saved in cash (i.e. not in a bank account).

As a general rule if it doesn’t meet the genuine savings criteria listed above then it will not be considered as genuine savings.

Don’t worry too much! You may qualify for a no genuine savings mortgage, if you apply with the right lender this requirement may be waived. In most cases the cost of a no genuine savings home loan is very similar to a loan with a requirement for genuine savings.

Grey areas…

The policy used by lenders to assess genuine savings is very complex, and in addition to this there are some types of savings that can be accepted on an exception basis. The secret to getting approved is to apply with a lender that accepts the type of genuine savings that you can provide.

Some examples of genuine savings that may or may not be accepted by the lender are:

• Equity in existing real estate (i.e. you own a property already).
• Extra repayments on your debts made over the past three to six months.
• Rent payments (must be through a property manager and have been 12 months in your current residence).
• Tax refund (must be currently renting to be accepted).
• Inheritance (must be currently renting to be accepted).
• Sale of a non-real estate asset (must be currently renting to be accepted).
• Commission or bonuses from your job (must be currently renting to be accepted).
• Money that comes from a non-genuine source (e.g. a gift) that have been held in a savings account for three months or more.

Please refer to the specialist mortgage brokers at the Home Loan Experts if you would like to know more about using one of these methods to prove genuine savings. You can view their page on genuine savings for more information.

Do the major banks require genuine savings?

Yes, at present all of the major banks have a requirement for genuine savings. ANZ & CBA tend to be quite strict with this requirement while Westpac (WBC), NAB & St George (SGB) have slightly more flexible policies. Please note that all of them are relatively strict when compared to lenders that do not require genuine savings at all and have similarly priced mortgages!

In addition to this the two major LMI providers Genworth and QBE LMI both have requirements for genuine savings under their standard products. Both will accept no genuine savings loans under their non-standard LMI products however the LMI premium may be higher and credit assessment will be significantly stricter.

There is no question about it, banks and lenders often require genuine savings in order to qualify for a loan.  However, this is not always the case.  Loans without genuine savings are possible, and can be made as long as you are in the right situation.  

You can be the proud recipient of a gift, or be the beneficiary in an estate proceeding where you are made an heir to a large amount of cash, or you made a windfall in the stock market by playing it smart.  All of the above mentioned items are not genuine savings but are viable deposit substitutes.  All that genuine savings does is make it less risky for the banks when they give out and approve a loan.  However, it is still not a guarantee that the repayments will be paid.  The same thing goes for no genuine savings, the banks and lenders may be taking more risks, but it does not immediately mean that the person with no savings will not be able to make the repayments.

Thus, all a person has to do is to prove that they have enough money to make a certain deposit amount, and that it does not have to be genuine.  The only difference is that the money is not kept in the bank for 3 to 6 months, which is usually the main indication whether a certain amount is genuine or not.

This means if you are in such a situation where you have enough money to make a deposit, but the only problem is that it is not genuine and you are fortunate to have such an amount on hand, then you can consult us, the home loan experts.  We can provide you with the necessary information on no genuine savings loans, and how to maximize their use.  Enquire online now for free!

There is no doubt that property prices of Australian real estate are constantly on the rise.  Due to this fact, it is becoming harder and harder for investors and first home buyers to make the initial deposits, or get a loan in the first place. What makes it more difficult is that often the market values of properties often rise rapidly, faster than the income you make and the savings you put in your bank account.
Several banks and lenders recognise this continuous problem, and have tried a number of ways to remedy and fix the existing problem.

One of the solutions to get around the deposit that you require is through a family guarantee. The basic idea of a family guarantee is that it will allow you to purchase a home without the need for your own savings as a deposit. With a family guarantee, the existing equity in the guarantor’s home can be used to add as funds for the loan.

A family guarantee however requires that the family member making the guarantee has adequate assets of their own. This means that a family guarantee may not be as effective if the family member acting as the guarantor has low assets of their own, or does not have a good credit score.

With a family guarantee, you are able to apply for many loan types. The loan can have a fixed or variable rate, it can be a no doc or low doc loan, capped rate loans, and many more.

So what are you waiting for? Why loan just 90% when you can loan up to 100% of the property’s value with a guarantee home loan.