Just when you thought that you could get the best home loan deal by simply having a lump sum of cash, you might have to think again. Not all cash deposits are acceptable in applying for a home or investment loan when your deposit is less than 20% of the purchase price. So what are genuine savings?  Let’s explain here.

These days you can obtain a home loan with as little as a 5% deposit. That means a bank can lend you up to 95% of the purchase price. But if you are considering applying for a home loan with a deposit that is less than 20% of the purchase price, then major lenders require that at least 5% of your deposit needs to be made up of genuine savings.

1. By definition, what are genuine savings?

These are savings that are held or accumulated in a savings account for at least three months.

2. What other assets might be considered as genuine savings?

Other assets that can be considered as genuine savings are term deposits, shares, and equity in property that are held for at least three months.

If you have any debts, e.g. a personal loan, and you have been paying extra off your debt above the minimum requirement, you can use this extra repayment towards your genuine savings calculation.

If you are currently renting for 12 months or more through a Real Estate agent, you may be able to use those rent payments towards your genuine savings calculation as well. Please contact us to discuss your personal circumstances to see if you qualify.

3. What does not qualify as genuine savings?

Gifts from parents

Tax refunds

Income Bonuses

Inheritance money

Cash kept at home

If any of these apply, we recommend that you place those funds into a personal savings account and hold them there for three months to qualify.

4. How much do I need for a home loan deposit?

You can obtain a home loan with as little as a 5% deposit. The major lenders may provide a mortgage up to 95% of the value of the property. In some instances you may be able to borrow the whole amount, contact us to see if you qualify.

5. Can I buy a property if I don’t have genuine savings?

We have access to lenders where you can borrow up to 95% of the purchase price without having genuine savings. Of course you still need to come up with at least a 5% deposit plus funds to complete (stamp duty, legal costs etc). Contact us today and our home loan specialists will answer all your questions and assist you with finding the right home loan for your situation.

 

Richard Khuong
Director, Simple Easy Finance Pty Ltd
Property & Finance Strategist
E: Richardk@simpleeasyfinance.com.au