In most instances in order to purchase a property and obtain a loan, you’ll need a deposit. Most lenders will want to see just how you’ve saved that deposit and classify it as genuine or non-genuine savings. This difference in savings becomes particularly important if you’re borrowing over 80% of the property’s price as the lender will want to see that at least 5% of the money you're using towards your property consists of genuine savings. So, what classifies as genuine and non-genuine savings?
Genuine Savings
Lenders like to see genuine savings because it shows that you have the discipline to save money regularly. This indicates that you’re able to live your regular lifestyle whilst also having the ability to save for your future goals. A savings habit demonstrates to a lender that you’re less likely to default on a mortgage.
Examples of genuine savings are:
Funds held or accumulated in a savings account for 3+ months
Shares or Managed Funds sold when held for 3+ months
Term Deposits held for 3+ months
Gift Money held in savings account for 3+ months
Non-Genuine Savings
If you haven’t been able to regularly save but have a deposit, these funds may be made up of non-genuine savings. These savings are generally anything that wasn’t saved up over time. For example:
A recently received gift or inheritance
Money received from the sale of an asset i.e. car
Tax Refunds
Work Bonuses
Every lender has different policies and as a broker I can assist to determine what type of savings you have so the most suitable lender is chosen. If you’ve got any queries, feel free to contact myself on 0401 225 713 or lmckean@lbkprivatelending.com.au.
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