In recent times most lenders have introduced mandatory genuine savings policy. Genuine savings show the bank that the applicant has a bit of skin in the game, a bit of hurt money that you have saved up yourself.
Most lenders like to see 5% of the property purchase price saved in a bank account for 3 months but there are a few exceptions to this rule.
Today we’ll walk you through what Genuine Savings are, some examples of genuine savings, what doesn’t make up genuine savings and a little hack you can use to speed up the time it takes to get genuine savings!
- Lenders consider the following forms of genuine savings
- What is not classified as genuine savings?
- Can I use what I pay in rent as genuine savings?
- If I rent, do I still need a deposit?
- Lenders that Don’t Require Genuine Savings
Lenders consider the following forms of genuine savings
- ✅ Savings held or accumulated over 3 months
- ✅ Shares or managed funds held for 3 months or greater
- ✅ Equity in real estate or property
- ✅ Term deposits held for 3 months or greater
- ✅ First Home Super Saver Scheme (FHSSS)
- ✅ Some lenders allow exceptions if rent has been paid for the last 3 months or greater
The majority of lenders agree on what makes up genuine savings, but where they differ is when genuine savings are required. Some lenders only need to see genuine savings if you have less than a 10% deposit (90% LVR) whereas others want to see it if you have less than a 15% deposit (over 85% LVR).
To play it safe you can assume genuine savings is required when lending over 85-90% of the property value.
The lender generally wants to see 5% of the purchase price held for 3 months or longer – in some cases (particularly for investment properties) lenders require greater than 5% of the purchase price as genuine savings.
Keep in mind that the lender only requires 5% (of the purchase price) held for 3 months or longer. Which means funds for stamp duty and other costs do not have to be held for 3 months or greater.
For example, if you’re purchasing a property for $500,000 then genuine savings of 5% of this purchase price is $25,000. You’d need to hold $25,000 for 3 months or greater to meet the genuine savings policy plus hold enough funds to cover stamp duty/other costs applicable. Also be aware that lender mortgage insurance will be applicable.
What is not classified as genuine savings?
Just holding money in your savings account isn’t going to cut it as genuine savings, the banks want to see you have some hurt money and have held your savings for at least a few months so the following items do not count as genuine savings:
- ✅ Gifts from Parents or relatives
- ✅ Inheritance from other family members
- ✅ Refunds from tax returns
- ✅ Bonus income from work
- ✅ Sale of your assets like cars
- ✅ First Home Owners Grant (FHOG) or Great Start Grant
- ✅ Money held in a business banking account
- ✅ Money from personal loans, credit cards or borrowed sources
- ✅ Incentives paid from property developers, or builders
Can I use what I pay in rent as genuine savings?
If you have good rental history, some lenders will consider making an exception to the genuine savings policy and consider deposit from other sources like gifted funds from your parents that don’t need to be held for over 3 months.
To use rent as genuine savings you need to:
- ✅ Be currently renting, and have at least 6 months clean rental history
- ✅ Be currently renting via a licensed property manager (i.e. not a private rental, or living at home with your parents)
- ✅ Ensure the tenants on the lease are the same as the people who will be on the home loan application
Good news is if you can fit these criteria, the rent you have paid over the past 6 months will be considered instead of showing genuine savings and therefore you can use deposit sourced from ’non-genuine’ savings like a gift from your parents.
You will need a copy of the rental ledger, or reference letter from your property manager as evidence to use rent as genuine savings.
If I rent, do I still need a deposit?
You will still need to provide a deposit for your home loan even if you are renting.
We recommend you have been 8-10% of the property purchase price in savings, or you can work with less if you have a guarantor.
Lenders that don’t require genuine savings
In recent times banks have eased up on their genuine savings requirement. The genuine savings requirement is largely determined by how much deposit you have on your home purchase.
- ✅ 20% deposit: There is no genuine savings required
- ✅ 10-15% deposit: You don’t need to show genuine savings anymore
- ✅ Less than 10% deposit: Some (but not all lenders) don’t need to see genuine savings
- ✅ Guarantor home loans: Most banks do not need to see any genuine savings if you are getting the help of a guarantor
If you have less than a 10% deposit, it is possible to get up to a 95% LVR home loan without genuine savings.
This is provided you meet some of the following terms:
- ✅ You have been renting for the last 6 months and have been paying rent on time
- ✅ You have been regularly employed over the past 12 months
- ✅ You have a good credit score
- ✅ You do not have too many credit cards or car loans
Get in touch with our team to see if you fit with a non genuine saving option, complete a free assessment or get in touch on 1300 088 065.
Next steps and settling your new home
Our team here at Hunter Galloway is here to help you buy a home in Brisbane. Nathan & Joshua Vecchio are Senior Mortgage brokers who specialise in making your home journey easy.
Unlike other mortgage brokers who are just one person operators, we have an entire team of experts to help make your home loan journey as simple as possible.
If you want to get started, please get in touch here and we can book a time that suits you – either a phone call information session or a face to face meeting (which doesn’t cost anything for you).
Further reading for Home Buyers…
- 🏡 For our comprehensive guide for First Home Buyers, check out this page here.
- 🏡 Looking at getting a loan, check out our Complete First Home Buyers guide.
- 🏡 Home Loan Guide to Brisbane
- 🏡 And don’t forget the costs of buying which we covered in detail here.
Contact us today – Nathan Vecchio – 0410 000 689