Saving a home loan deposit can be challenging enough. Then, lenders often will put another hurdle in your way by asking for proof of ‘genuine savings’. Here’s all you need to know about clearing that obstacle.
Lenders use the term ‘genuine savings’ to describe any funds you’ve saved over a period of time.
Basically, it’s their way of confirming that you’re in this for the long haul – that you’re committed to being financially responsible with your money.
For example, if you’ve received a gift from your parents to help cover the cost of your home deposit, some lenders may still want you to verify that you’re putting an allocated amount of money aside in a savings account on a regular basis.
What many home buyers don’t realise though is that there are several different ways you can verify that your savings are genuine.
Here are some types of savings lenders may consider genuine savings
– Regular deposits into a savings account over 6 months
– Term deposit savings accounts held for at least 3 months
– Shares or managed funds held for at least 3 months
– Rental history for the past 6 months
– Salary sacrificing through the First Home Super Saver scheme
– Additional repayments into a car loan or personal loan
– Deposit paid to a real estate agent, builder or developer that was originally in your savings account prior to being paid (i.e. not borrowed from somewhere else)
Keep in mind that different lenders will have different policies around what they will and won’t accept as genuine savings.
As an example, showing some banks your rental payment history may not be enough without also showing them savings account bank statements that prove you’re depositing money regularly.
What doesn’t count as genuine savings?
Having plenty of cash sitting in your savings account often isn’t enough for some lenders. They may still want to see you’re able to save money over a period of time as well.
Here are some examples of funds that won’t count as genuine savings with the banks:
– Gift from parents or family
– First Home Owner’s Grant (FHOG)
– Borrowed funds (for example money taken from a personal loan)
– Selling assets (for example selling a car or furniture to raise cash)
– Tax refund
A few final pointers
Keep in mind that some banks may consider using the FHOG towards your overall deposit amount in some circumstances.
Likewise, there are situations where a gift from a family member could be large enough to avoid the need to prove genuine savings at all.
The key to improving your chances of getting your home loan approved is to structure your genuine savings history so that it appeals to the right lender.
If you’d like help setting this up, speak to us to today about the best ways to verify your savings. That way you’ll have a much better chance of getting your mortgage application approved.
So you’ve found the ideal property and it’s time to source finance? Here’s how to play your cards right and get a great home loan deal sorted before the settlement date.
Educating the kids, wedding planning, plumbing – there are some things in life that are better outsourced to professionals.
Similarly, when you’ve finally found the home of your dreams, and you need to keep ahead of the avalanche of tasks that follow, using the services of a mortgage broker can make the process a lot less overwhelming.
Your three choices
Basically, there are three ways you can go about getting your loan. You can go straight to your bank, you can look for the best deal yourself, or you can seek the help of a mortgage broker.
However, as buying a home is quite likely the biggest single financial transaction that you’ll ever make in your life, it’s important to make the right choice.
1. Going to your bank
For some people, it’s natural to go straight to the bank because that’s what you know and trust and it’s probably what your parents did.
But this can be a mistake. There are dozens of lenders out there who may be offering better deals, and your bank may take advantage of you not shopping around due to your misplaced loyalty to them.
If you have established a good credit history and a steady income, chances are that you’ll still be able to get a good interest rate through a bank. What they can’t and won’t do though is tell you if there is a better deal available elsewhere.
2. Going it alone
You can jump online and start doing loan comparisons yourself. Be aware though, that there are differences in criteria, so it’s not altogether straightforward and online calculators will have built-in assumptions.
You will need to have a good understanding of the industry and a good grip on the terminology.
You’ll also need to understand the implications of loan terms, fixed interest and variable interest options, interest only vs principal and interest, mortgage protection insurance, credit history, and employee vs self-employed status.
Finally, you’ll need to consider redraw options and offset accounts. That’s a lot to weigh up in a short amount of time – especially if you need to source finance quickly.
3. Using a broker
Having a broker is like having a personal shopper who will research and compare hundreds of available market options in search of the best deal for you. We’re also required to hold or operate under an Australian Credit Licence.
A broker will have access to multiple lenders and multiple products, will be able to compare and recommend suitable loan options, negotiate the loan on your behalf, and guide you through from application to settlement.
We also don’t cost any extra. That’s because we’re paid a commission by the lender. Rest assured though, that we’re driven to secure the best possible home loan deal for you.
After all, having you tell family and friends at your house warming party about how we secured you a great home loan is much more valuable to us than slight variations in commissions.
The choice is yours
Any of these three options will get you there, but choosing a mortgage broker like us is likely the best way to be fully informed before you commit to a loan.
We’re happy to answer any questions you have, any time, meaning you don’t have to trawl through pages upon pages of Google to find the correct answer.
It’s also the most stress free way of getting your finance lined up in time, so that the home of your dreams doesn’t get snatched up by someone else!
If you’d like to know more about how we can secure a great home loan for you, get in touch today.