How you save your deposit can sometimes be part of the criteria a lender looks at when assessing your home loan application.
That’s why it’s important to understand what they consider as ‘savings’. To make it simple, here’s what Banks & Lenders accepts as savings.
Different home loan products have different saving requirements. Let’s break it down and see what can be considered part of your deposit:
Genuine Savings
If the loan you are applying for has a Loan to Value Ratio (LVR) greater than 80% or 90% depending on the lender, then a deposit of 5% genuine savings is usually required
Each lender has their own set of rules around genuine savings requirements however it is generally defined as one of the folowing:
- Cash amount = or > 5% of the property purhase price & that has been held in your account for at least 3 months
- Cash amount = or > 5% not held for 3 months but with a regular saving patterns over this period
- A perfect rental history for the last 6 or 12 months if you are renting through a Real Estate Agency
- If you already own a property then equity in this existing property is also condidered genuine savings
- Shares or Managed Funds held for a minimum of 3 months
NON Genuine Savings
If you can’t demonstrate genuine savings the you have the following options in order to get a loan:
– Work your way to meet the Genuine Savings Requirement – in some cases a little wait can do the trisk
– Check if a Family Guarantee type loan is feasible for you
– Opt for a non genuine loan option. Some lenders have non genuine option up to 90-95% LVR. There may be some restrictions like not being able to get this loan for constrution or paying a slightly higher rate however these are available. The following is classed as non gnuine savings and can from your deposit if you fall in this category:
- The First Home Owners Grant
- Money you’ve received from the sale of your car or other belongings
- A cash Lump sum deposited into your account – Usually any amount over $3,000 is considered a lump sum
- A Gift
- An Inheritance (held for at least 6 months)
- A tax refund from the ATO.
- A bonus received from your employer or accrued leave (annual or long service).
When it comes to demonstrating funds available for your deposit – whehter Genuine or Non Genuine – you will need to provide documentation – like a bank statement, which shows the money was held or saved in your name for at least 3 months – or if it is a gift from a family member, then a statutory declaration is required to confirm that this money is non-repayable.
Lender’s have a responsibility and this is why they ask about the source of your funds and how you’ve saved the deposit because it helps them understand your ability to budget and meet home loan repayments each month.
Whether your savings are considered genuine or non-genuine, at Go Mortgage we’ll always look at the bigger picture and figure out how we can get you to reach your goal of Home Ownership.. even if this takes a little time and some effort.
If you really want to own your own home then get in touch