If you want a higher LVR, lenders/credit providers require you to show evidence of genuine savings. Don’t worry if you don’t have enough money in personal savings account. Many other things can qualify as genuine savings. If it’s impossible for you to manage 5 % savings, ask a finance broker to help you.
If you are a first home buyer and you require a home loan, it is important to know how much deposit you will need so you can get started with establishing a suitable savings plan.
What do Genuine Savings mean?
Genuine savings is the savings (equity) required by you to complete the purchase of a property and get a home loan for a property purchase. You must, however, be able to demonstrate to the lender/credit provider that you have genuinely saved/held or evidenced these savings via account statements over an established period (normally for 3 months).
Why are Genuine Savings required?
Genuine Savings are required by most lenders/credit providers when the Loan to Value Ratio (LVR) is greater than 85% of the security value of your property. This means you are required to show evidence of a regular savings pattern over a defined period of at least 3 months.
What Sources can Genuine Savings come?
Where the Loan to Value Ratio (LVR) is greater than 85%, the minimum deposit can come from any of the following sources:
>> Personal Savings Accounts and or Term Deposit Accounts (held for at least 3 months)
>> Real Estate Equity held in an existing property
>> Share Certificates (held for at least 3 months)
>> Gift or Inheritance (held in the applicants account for at least 3 months)
>> Tax Refunds (confirmation via your Tax Assessment Notice showing that your refund has been deposited to a savings account)
Reminder: Lenders/credit providers have their own set of rules when it comes to determining genuine savings. So, make sure you do your homework and explore all your options.
What Amount of Genuine Savings do I need?
The amount of Genuine Savings required to be contributed by you will depend on your following circumstances:
>> If you intend to purchase or build an owner occupied property, you will need to contribute 5% of the security value in the form of genuine savings.
>> If you intend to purchase or build an investment property, you will need to contribute 10% of the security value in the form of genuine savings.
What are unacceptable as Genuine Savings?
The following types of savings (or equity) are not an acceptable form of Genuine Savings:
>> First Home Owners Grant (FHOG)
>> Borrowed funds (for example a personal loan)
>> The sale of an asset other than a property (e.g. the sale of a motor vehicle)
Can my Rental History be used as a substitute for Genuine Savings?
Yes, if you have less than 5% genuine savings, some lenders/credit providers will look at the following key points:
>> Are you able to confirm a minimum of 12 months satisfactory continuous rental history in your current rental property?
>> Is the property currently being rented by you being managed by a Licensed Property Manager/Real Estate Agent?
What if I do not have Genuine Savings?
Most lenders/credit providers understand that customers are not always able to demonstrate genuine savings and will consider other forms of savings. In such instances, you must speak to professionally qualified and expert finance brokers. He/she will find a lender who doesn’t make genuine savings compulsory and help you obtain deposit-free home loans.
So, don’t worry if you don’t have any genuine savings, contact a finance broker with wide experience of finding home loans without genuine savings.
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