Who knew that not every dollar in your bank account can contribute towards your home deposit?
In fact, savings can fall in to two different categories and you must be able to prove to lenders that you have diligently saved money over time and that you have well established savings practices. Lenders assess this to ensure that you can service the home loan and afford your monthly repayments.
What is classified as genuine savings?
Genuine savings describes the funds that borrowers have saved over a period on their own, however different lenders have varying definitions of what classifies as genuine savings, so be sure to check.
Generally, most lenders will classify the below as genuine savings:
- Money saved in a bank account in your name for over three months
- Funds contributed towards your superannuation account under the Federal government’s First Home Super Saver Scheme
- Term deposits held for three months
- Shares held for three months
- Cash gifts held for three months
- Inheritance funds held for three months.
What is not classified as genuine savings?
Non-genuine savings are not accepted by all lenders on all of their products because they don’t always demonstrate good savings habits. These can include:
- Tax refund
- Bonuses from work
- Sales profit of an asset other than a vehicle
- First Home Owner Grant
- Borrowed funds
- Short-term cash savings
- Money held in business or company bank accounts
- Builder and vendor rebates/ incentives.
If you’re struggling to save or don’t have genuine savings available, there may be other options to allow you to achieve your home deposit. Contact your mortgage broker for more information about available options.