| Genuine Savings Explained
When applying for a home loan, lenders consider a history of “Genuine Savings” as an essential criterion. These are funds that you have gradually saved yourself over time. Genuine savings show the lender that you have the self-discipline to save a certain amount, which helps them assess your capacity to make monthly loan repayments.
Lenders usually require proof of at least 5% of the purchase price in genuine savings. However, each lender has slightly different definitions and requirements. Some examples of what lenders consider as “genuine savings” include at least three months of accumulated savings, a term deposit held for at least three months, or shares or managed funds held for at least three months.
Some lenders will also consider rent that you have been paying over time (preferably 6-12 months) as part of genuine savings. It’s best to speak with your mortgage broker about this option.
On the other hand, what is not considered as “genuine savings” includes the First Home Owners Grant, inheritance, gifts, tax refunds, loaned money, or money from the sale of something like a car. Different lenders have different rules on genuine savings, but most will require some proof.
Typically, you’ll be asked for a minimum of 5% of the purchase price in genuine savings, which translates to $30,000 for a $600,000 home. Then, you can make up the rest of the deposit from other sources.
In conclusion, speaking with your Mortgage Broker is the best strategy to determine the amount of genuine savings required by the lender and recommend the best-suited lender for your individual situation.
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