What is Genuine Savings?

By 28 September 2015Education
Loan To Value Ratio (LVR)

Genuine Savings

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.

Contact us today – Nathan Vecchio – 0410 000 689

For more information on what is LMI and renovation tips.

Mortgage Broker

Author Mortgage Broker

More posts by Mortgage Broker

Leave a Reply