What counts as genuine savings?

When applying for a home loan, especially if the loan is for over 80% of the value of the property, you will likely need to provide the lender with evidence that you have a satisfactory amount of savings, showing that you have potential to save and put away funds, and draw upon your income to make repayments.

The difference between non-genuine and genuine savings varies with each lender. However, the common view is that genuine savings are those that you accumulate over time, generally over a period of 3 months a minimum, and preferably 1 year or longer. This helps the lender know that you can repay regular amounts reliability.

Sums of money that are gifted to you or received as a lump sum from a transaction are considered not to have been genuinely saved over time, and therefore don’t count as genuine savings. These can include:

• Cash gifts and inheritance
• Casino or gambling winnings
• Tax refunds
• Bonuses
• Borrowed funds, including personal loans
• Equity in an existing property
• Sale of an asset (e.g. your car or expensive items) or shares
• Government grants or other finance offered as incentives

Whilst funds and lump sums gifted to you are not usually considered as genuine savings, if you put these funds into a savings account and leave them untouched for at least 3 months, they can then be considered as genuine savings.

If your savings are considered non-genuine but you are still looking to obtain finance, an MFAA accredited finance broker can help you find other suitable options.

A guarantor loan may be an option for you, where having a guarantor on your loan eliminates the need for a deposit, as the guarantor is using the equity in their home to guarantee your deposit.

If you have a strong record of renting property, a lender may waive the requirement to show genuine savings, as rent paid demonstrates your ability to repay regular amounts. Rent that you are currently paying won’t continue after you buy your home, so this can be viewed as additional capacity to pay your home loan. As proof, lenders may ask you to provide a letter from your real estate agent confirming that you paid your rent in full and on time for the last 12 months.

If you have other significant assets such as managed funds, shares or equity in residential property, this may also be accepted as genuine savings depending on your lender.

Every lender has different rules around genuine savings requirements. Speak to a Mortgage Providers broker who knows which lenders have suitable policies for your financial goals, and can set you up with the right loan.