When looking to purchase your property, having a deposit alone is not enough. Most lender have policy which will policy which require that part of your deposit is from a "genuine" source. This is generally dictated my the lender policy and the Lender Mortgage Insurance(LMI) they use. So what exactly is genuine savings.
What is Genuine Savings?
Genuine savings is a term used by the lending industry when defining whether the funds to be used as a deposit by a proposed borrower (for a property purchase) have been genuinely saved over time.
In general, below is a list of what are often considered to be genuine savings from a lender:
Savings (term deposits or high-interest savings account) if held for 3 months
Real estate equity
Inheritance funds if held for 3 months
Cash gift if held for 3 months
Shares/managed funds if held for 3 months
In some case, 3 months rental history can can also be considered genuine savings.
When and How much Genuine Savings is required?
When borrowing more than 80% of the property value, lenders will require that you show genuine savings. In most cases this sets in at 85% and a few lender requiring it only when you borrow above 90% of the property value.
Here, the lenders will require that 5% of your savings is genuine, meaning that the rest of the deposit can come from other sources eg. gifted funds.
As mentioned earlier, this is normally dictated by Lenders Mortgage Insurance providers which the lender require you to take out once you borrow above 80% of the property value.
What if I don't have Genuine Savings?
Options still exist if you do not meet genuine savings requirement:
In general, different lenders have different requirement. Home Loan Depot can help you better understand these requirements, if your savings qualify as genuine, what are your options if you don’t have genuine savings and help you determine how much more to save until you can apply for your loan.
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