In recent times most lenders have introduced mandatory genuine savings policy. Genuine savings shows the bank that the applicant has a bit of skin in the game, a bit of hurt money. Most lenders like to see 5% of the property purchase price saved in a bank account for 3 months. 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
- Term deposits held for 3 months or greater
- Some lenders allow exceptions if rent has been paid for the last 3 months or greater
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.
Genuine savings is required when lending over 85% of the property value.
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.
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