Genuine Savings

What is Genuine Savings?

Genuine savings is a policy recently re-introduced by lenders wherein you must now prove a minimum of five percent savings over a period of three months to qualify for a home loan.

Each lender has variances as to what they define Genuine Savings to be; as such it is recommended that you do your research, or alternatively speak with a specialised Mortgage Broker who understands the different concessions each lender provides.

Why are lenders so strict when it comes to this policy now?

Lenders have tightened their belts ever since the Global Financial Crisis (GFC), and as a result have removed the availability of 100% loans. This type of loan is now only available with a Guarantor or Family Guarantee Mortgage.

The Director of The Home Loan Experts, Otto Dargan said “The reasoning behind this is that history has proven that First Home Buyers have the highest percentage of defaults on their home loans. Therefore, to mitigate this risk to the banks, Genworth and QBE have introduced a Genuine Savings Policy which shows the borrower’s ability to save and also to repay their loans.

Genworth can consider non-genuine savings loans, under their Home Buyer Plus product, however this does come with a much higher LMI premium and a stricter lending criteria.”

What qualifies as Genuine Savings?

Genuine Savings must add up to 5% or more of the purchase price of the property. Below is a list of what lenders consider as Genuine Savings (This does vary per lender):

• A Share Portfolio or Managed Fund held for a minimum of 3 months.
• Term Deposit held for 3 months.
• Savings or Everyday Transactional Account held in and/or accumulated over 3 months.
• Equity you already have within an existing property.
• Rental history from a Real Estate Agent (restrictions apply, and not all lenders consider this to be genuine savings-please see below for more information on this).
• Funds held in a federal government First Home Saver Account.

Please Note: Lump sum deposits into accounts are generally not considered as Genuine Savings, as lenders do prefer to see bank account statements showing regular and constant deposits.

Rent Payments as Genuine Savings.

A select few lenders will consider rental history as Genuine Savings; however they do have strict criteria that need to be met in order to receive this policy exemption:

• The property you are currently renting is through an authorised Real Estate Agent or Licensed Property Manager.
• Those on the rental agreement or lease, must be the same as those on the home loan application.
• You must have been renting at least the past 12 months with no late payments present on the Real Estate Rental Ledger.
• Although a select number of financial institutions will consider Rental History as Genuine Savings, you will still be required to provide proof that you have sufficient surplus funds to complete the settlement of your loan.

How do I apply for a Home Loan with Genuine Savings?

An experienced Mortgage Broker such as The Home Loan Experts will be able to assist you with structuring your Home Loan to best meet the lenders criteria.