Did you know that lenders have a mandatory savings policy when purchasing with a minimal deposit?
This is known as genuine savings..
Genuine savings show the bank that you have a bit of skin in the game—some hurt money that you saved up yourself. Most lenders like to see at least 5% of the purchase price saved up in a bank account for three months or longer.
But there are a few exceptions to this rule. In this post we are going to walk you through everything you need to know about genuine savings.
We will cover the following
- What is considered genuine savings?
- What is not classified as genuine savings?
- Does rent count as genuine savings?
- Which Lenders Don’t Require Genuine Savings
1. What is considered genuine savings?
Lenders consider the following as 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
When are genuine savings required?
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 you are borrowing over 85-90% of the property value.
How much genuine savings should I have?
Most lenders generally want to see 5% of the purchase price as genuine savings. In some cases—like 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. This means funds for stamp duty and other costs do not have to be held for 3 months or longer.
For example, if you’re purchasing a property for $500,000 you would need to hold at least $25,000 (5% of the purchase price) for 3 months or greater to meet the genuine savings policy. In addition to this, you would also need to hold enough funds to cover stamp duty/other costs applicable.
Also be aware that Lender Mortgage Insurance will be applicable if you have a deposit of less than 20%.
2. What is not classified as genuine savings?
If you have a minimal deposit, just holding money in your savings account isn’t going to cut it as genuine savings.
The banks want to see that you have held your savings for at least a few months. So, the following items do not count as genuine savings if they haven’t been held in your bank account for at least three months:
- ✅ 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.
Now a quick tip here: If you’ve held any of the above funds in your bank account for three months or longer this can be considered as genuine savings. For example if you sold your car six months ago and the money has been in your account for the last six months, this will be counted as genuine savings. But if you’ve sold it only in the last month, then it won’t count until you’ve held the funds in there for three months or longer.
3. Does rent count as genuine savings?
If you have a good rental history, some lenders will consider making an exception to the genuine savings policy. They will consider deposits 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. This means you should not have missed a single rental payment during those six months.
- ✅ Be currently renting via a licensed property manager not a private rental, or living at home with your parents.
- ✅ Ensure the name of 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. Therefore you can use a 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 in order 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 between 8-10% of the property purchase price in savings to use as a deposit. You can work with less than 8-10%, if you have a
4. Lenders that don’t require genuine savings
In recent times some 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 don’t need to see genuine savings but others still do.
- ✅ 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 provided you meet some of the following criteria.
- ✅ 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.
Banks and lenders change their criteria for lending all the time, so we haven’t published a list of lenders here because it would quickly become out of date. Get in touch with our team to see if you are eligible for a non genuine savings option. Complete a free assessment here 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.
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.
Nathan, Jayden, & Joshua Vecchio are Senior Mortgage brokers who specialise in making your home journey easy.
If you want to get started, please get in touch here and we can either book a phone call information session or a face to face meeting at no cost to you.
Further reading for Home Buyers…
- 🏡 For our comprehensive guide for First Home Buyers, check out our Complete First Home Buyers guide.
- 🏡 Looking at getting a loan? Check out our Complete First Home Buyers guide.
- 🏡 Looking to get a home loan in Brisbane specifically? Check out our Home Loan Guide to Brisbane.
- 🏡 Have less than a 20% deposit? Find out about Lenders Mortgage Insurance.
- 🏡 And don’t forget the hidden costs of buying which we cover in detail here.