What counts as genuine savings in a loan application when purchasing a property?
When applying for a home loan and particularly if the loan is for more than 80% of the property’s value, it’s more than likely you will need to provide evidence to your chosen lender that you have a satisfactory amount of savings. This is to demonstrate your ability to funnel a portion of your income into repayments.
Although it can differ, in most cases, lenders will look for consistent additions to savings over a period of at least three months and preferably a year or more. This means that the following are not considered 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
Can I still get a loan without genuine savings?
For those who don’t have any genuine savings but still want to obtain finance, there are alternative options, including:
- Guarantor loans: 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. There are even situations where the sale of a vehicle can be considered as genuine savings if proved that it was owned for three months or more.
- A strong rental record may see a lender allow you to forgo the genuine savings route. Some lenders will waive the requirements if a letter can be produced from a licensed real estate agent confirming that rent has been paid on time and in full for the preceding 12-months, as it highlights your ability to make repayments on time and on an ongoing basis.
