“Genuine savings” is a hurdle that often confronts first home buyers. It is a mandatory policy that many Australian lenders have when clients are looking to borrow over 85% of the purchase price. It is in place to slow the number of first home buyers applying for loans with no deposit and no savings history.
Determining what is, and isn’t “Genuine Savings” is a little complex. The basic rule of thumb is that the borrower must be able to demonstrate that they have “genuinely saved” a minimum of 5% of the purchase price. For example: Purchase price – $500,000 = Genuine Savings of $25,000. The following types of savings are considered to be “genuine”
- Savings accumulated or held over the 3 month period prior to application
- Shares or managed funds held for 3 months
- Term deposits held for 3 months
- Equity held in real estate
- If you have been renting via a licensed real estate agent for at least 3 months prior to application (exceptions may apply)
The following is a list of what is NOT considered genuine savings:
- Tax refund
- Gifts
- Lump sum deposits
- Bonuses
- Sale of car or other assets
- First Home Owner Grants
- Borrowed funds eg: personal loan
For more information on genuine savings and which lender you’ll qualify with give Stax Home Loans a call.
Ollie Hooper
Stax Home Loans
m: 0401 032 868