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What counts as genuine savings in a loan application?

When you apply for a home loan and if the loan amount is more than 80% LVR, you will need to prove to the lenders that you have a satisfactory amount of savings. This is to demonstrate your ability to keep a portion of your income into repayments.

In most cases, lenders generally need the borrower to shows the consistent additions to savings over at least three months and preferably a year or more. The following can't be considered as genuine savings:

  • a cash gift

  • an inheritance

  • casino/other gambling winnings

  • proceeds of the sale of a non-investment asset

  • government grants and other finance offered as incentives

  • any lump sum payments from unverified source

What if I don't have genuine savings, can I still get a loan.

For those who don't have any genuine savings but still want to obtain finance, there are options. These include:

  • Guarantor loans/Family Pledge - Having a guarantor on your loan may mean that no deposit is required, with the equity or asset the guarantor stakes standing in for a deposit.

  • Other significant assets such as shares, managed funds and/or equity in residential property. Depending on your chosen lender, cash isn’t the only thing accepted as genuine savings.

  • A strong rental record may see a lender allow you to forgo the genuine savings route - Some lenders have policies where they will consider your rental history. Consistent rental payments may be acceptable as part of whole of your deposit provided you can evidence excellent rental history, all applicants on the loan are evidenced as tenants on the rental agreement and a ledger can be provided by the property agent to support this. However, if there are three people on a rental property lease and two of those wish to obtain a loan, the lender will not accept this as part of their policy.

If you are planning to purchase your first home and you are not sure what should you do. Please talk to Kevin Poh on 0415820016. He may be able to guide you in getting your finance ready.

© Ace Broker. Credit Representative Number 498754 is authorised under Australian Credit Licence Number 389328. Disclaimer: Your full financial situation would need to be reviewed prior to acceptance of any offer or product.

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