What is genuine savings and why is it important for a home loan?

If you apply for a home loan, you'll more than likely have to prove to the lender that you have a satisfactory amount of savings. This is to demonstrate your ability to funnel a portion of your income into repayments.

In most cases, lenders generally look for consistent additions to a savings account over a period of at least three months. 

This means that the following are not considered genuine savings:

  • a cash gift;
  • an inheritance;
  • casino or 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 some options available:

  • Guarantor loans - having a guarantor on your loan may mean that no deposit is required. The equity and/or asset of the guarantor is used in place of a deposit.
  • Other significant assets such as shares, managed funds and/or equity in residential property - even situations where the sale of a vehicle can be considered as genuine savings if provided 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 the licensed real estate agent confirming that rent has been paid on time and in full for the preceding 12 months. This demonstrates your ability to make repayments on time and on an ongoing basis.

To find out more, get in contact with Edge Lending Solutions in Toowoomba.

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