Do I Meet the Genuine Savings Requirement

What does genuine savings mean?

Genuine savings means that you are gradually saving money. The term genuine savings is often used in a lender’s assessment of your home loan application, to determine if you are able to set aside money over time usually between a period of three to six months. This is different to normal savings in your bank account. 

How does genuine savings differ from normal savings?

Normal savings can be described as any funds that are used for purchasing purposes or for emergency funds. Normal savings differs from genuine savings as some aspects are not considered to be genuine by some lenders. Normal savings are usually: 

• Short-term cash savings

• Lump-sum deposit

• Cash gifts

• Inheritance

• Bonuses from work

• Tax refund

• Borrowed money

• First Home Owners Grant

• Money made from any sales

Whereas genuine savings include saving history of:

• Savings held for at least three months and more

• Term deposit that lasts for more than three months

• Equity in your property

• Funds or shares you’ve had for more than three months

• Funds salary sacrificed under First Home Super Saver Scheme

Every lender has its own policy as to what they consider to be genuine savings. You can use our Genuine Saving Requirement Calculator to show you the summary of your loan-to-value ratio and its savings requirement when you choose a home loan. 

Why do lenders require genuine savings?

The majority of lenders will require you to have genuine savings because you will need to illustrate that you have the capacity to service the loan. Having genuine savings shows that you can meet the loan repayments.

Lenders will look into your savings history, such as how much money you’ve spent in weeks or months, how much money you spend compared to your income, the amount of debt you have, and the type of 'things' you spend money on.

This is usually required when you are borrowing more than 80% of the value of the property since lenders consider this type of borrower high-risk compared to those with a higher deposit. Having genuine savings if you have a high LVR can increase the possibility of getting your loan approved. 

Are there any options if I don't have genuine savings?

If you don’t have genuine savings, one way that can help you get a home loan is through a guarantor. You can ask a close family member or partner if they can be a guarantor on your loan. 

If this can’t be an option, some lenders can also accept your rental history as proof of your capability to meet the home loan repayments. They will want to see that you were able to pay your rent on time for a minimum number of months. 

How much genuine savings do I need?

Generally speaking, lenders will require you to show genuine savings of at least 5% of the property value, especially if you are borrowing more than 80% of the property purchase price

For example,  if you are buying a $300,000 property, you will need to show $15,000 as genuine savings for a period of time without withdrawing the money. If you have more than a 20% house deposit, genuine savings may not be required. 

It is also recommended to have regular savings transfers to demonstrate that you have good saving habits. Lenders usually want to see your savings or term deposits untouched and growing for at least three to six months.