Genuine savings is an important component to get the nod of Aussie lenders for your home loan application. It’s not enough to just put down some money initially, most lenders would want to know if your deposit comes from a regular and stable source.
If you’re still unfamiliar with the term, learn these nuggets to help you understand how mortgage in Australia works, thus increasing your chance of getting approved.
All of Your Money Isn’t Considered as Genuine Savings
First and foremost, lenders don’t deem all of your financial sources as an example of this type of savings. A gift from friends and family, an inheritance and the profit from the sale of a non-investment asset (like a car) are generally not considered as genuine savings.
The funds you’d use as a deposit must be genuinely saved over time—at least for three months. Lenders want to see your history of genuine savings because it indicates how capable you are to maintain your home loan repayments.
Your Genuine Savings Should Be 5% of The Property’s Sale Price
The amount of savings you must show the lenders depends on the cost of the real estate. Generally, it’s 5%, but that’s obviously relative. The 5% of a $500,000 property is higher than the 5% of an estate costing $400,000.
Looking for and purchasing home and land packages in Melbourne, Sydney or Brisbane that are within your means is a universal expert advice. If not, you might have to wait a little longer to save some more and get the rate you’re eyeing.
You Can Still Qualify Without It
Although it’s imperative in traditional home loan transactions, some lenders are less conservative when it comes to genuine savings requirement. As a matter of fact, there are mortgage providers that require no genuine savings at all.
The catch, however, is that you’re most likely going to be subject to a higher interest rate. In addition, you must have exceptional credentials to impress such lenders.
Saving a sufficient amount of money just to meet relatively strict genuine savings requirements is no joke. It takes time and patience, but it’s certainly all for everyone’s best interests.