You’re filing in your home loan application (congrats, BTW), but the request for genuine and non-genuine savings has you stumped. Since when were savings not real savings?
When filling out your home loan application, one of the most crucial aspects that your provider will request will be proof of the amount of money you have saved for your deposit and the process you took to access the funds.
Basically, by asking this, your provider will be able to pinpoint whether you’ll be reliable and able to make your required repayments each month.
A home loan application has two types of savings that a home loan provider will examine: what’s known as “genuine” and “non-genuine” savings.
If you’re new to the homeownership market, here’s a breakdown of the difference between the two and how they will impact your home loan application.
Understanding “genuine savings”
As the name suggests, genuine savings are the amount of funds that an applicant has genuinely saved themselves gradually over a period of time. In most cases this will be for a minimum of three months.
Genuine savings are different from the amount you have in your bank account, as in most cases, your balance will include non-genuine savings.
Examples of genuine savings include:
Money held or saved up over at least three months
Term deposits (with terms lasting more than three months)
First Home Super Saver Scheme contributions
Equity in an existing property
Profits from the sale of a property
Overall, genuine savings shows a home loan provider that an applicant can budget and manage their finances responsibly. It also indicates that they’ll be a low-risk borrower and able to make repayments in a timely manner.
It’s a good idea to maintain comprehensive documentation of these genuine savings, such as payslips and bank statements to submit as proof.
Note: what one home loan provider considers genuine savings might not translate to others.
A look into “non-genuine savings”
On the flip side, there are also what’s known as non-genuine savings. In many cases, these can, but not always, cause red flags for home loan providers.
Why? Because these savings are generally “one-offs” and don’t necessarily demonstrate good saving habits.
Examples of non-genuine savings include:
Bonuses from work
Profit from the sale of an asset other than a property
Short-term cash savings (less than three months accrued)
The issue with non-genuine savings is that not all home loan providers will accept them as part of your overall deposit.
Is it all doom & gloom if you don’t have genuine savings?
Short answer: no
Long answer: there are some exemptions if you have some non-genuine savings in your account but are still hoping to be approved for a home loan.
This could include leaving your non-genuine funds in a savings account for three months minimum, as they will eventually be considered genuine savings by the home loan provider. Another option is finding a home loan provider that offers non-genuine savings home loans.
Suppose you have no deposit savings at all. In that case, you can also check out the option of a guarantor loan, which will allow a family member to support your loan until you’re able to build the savings and make the repayments yourself.
At the end of the day, every home loan provider has different rules around deposit requirements, so be sure to check with your lender to determine what are accepted as genuine savings.