What counts as genuine savings in a loan application?

If you apply for a home loan, especially if the home loan is more than 80% of the property’s value, you will most likely need to show the lenders that you have an adequate amount of savings. Most of the time, genuine savings will be 5 per cent of the property value. That is to show to the lenders you can funnel a portion of your income into repayments.

Although it can vary, in most cases lenders generally look for consistent increases to savings over at least three months and preferably a year or more. The following will not be considered as genuine savings:

a cash gifts
an inheritance
casino/other gambling winnings
proceeds of the sale of a non-investment asset
government grants and other finance offered as incentives.

Can you still apply for a loan without genuine savings?

For those who don’t have any genuine savings but still want to obtain finance, the following are few options.

Guarantor loans – Having a guarantor on your loan may mean that no deposit is required, with the equity or asset the guarantor stakes standing for a deposit.
Other investment assets - such as shares, managed funds and equity in the residential property. Depending on your chosen lender, cash isn’t the only thing accepted as genuine savings.
Rental record – some lenders will waive the requirement of the genuine savings if a letter from real estate agent to confirming that the rent has been paid on time and in full for the past 12 months, as that will prove the lender you have the ability to make the repayments on time and on an ongoing basis.

We always help our clients who do not have genuine savings by discussing the options still available to them. Sometimes just a matter of looking at their full situation and knowing which lenders are going to have their policy suit their needs and objectives. This knowledge can only be obtained through experience and also keeping in continuous communication with the lenders and to know what their policy niches are.

Come to speak to Kevin Poh on 0415820016. He knows a broad spread of products from multiple lenders, so he can match you with right lender and product.

Disclaimer: We recommend that you seek independent financial and taxation advice before acting on any information in this newsletter. It contains general information only and has been prepared without considering your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances. Your full financial situation will need to be reviewed prior to acceptance of any offer or product. Interest rates are subject to change without notice. Lenders terms, conditions, fees & charges apply.