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Genuine vs. Non-Genuine Savings

When buyers start seriously looking for property, they’ve usually come to a point where they’ve got enough money for a deposit. What many don’t realise is that there a different types of savings that lenders will assess, when looking at a buyer’s suitability for a home loan.

There are two types of savings that lenders will consider when a buyer applies for a home loan: genuine and non-genuine savings.

Genuine savings

This is money that you have put away consistently over a period of time – a lender will usually want to see 6 to 12 months worth of regular saving. This shows the bank that you have the discipline and capability to commit to monthly repayments.

Non-genuine savings

This is when a buyer has a lump sum of money that has either been gifted to them, or money they have made from selling assets, such as the sale of a car.

With it becoming harder and harder for first time buyers to get a foot in the property market, non-genuine savings are becoming more common. Lenders assess this type of money differently, because it doesn’t show that the buyer has the money to service the loan long-term.

Many banks require their customers to be able show at least 5 per cent genuine savings. For example: if you need a deposit of $100,000, at least $25,000 needs to be genuine saving. Other banks will take into consideration your rental history, and use this as evidence that a buyer can commit to regular payments.

As with most things, every bank has different policies, so it’s important that your buyers work with a broker so that we can assess what type of savings they have and make sure they’re taking the right option with the most suitable lender.

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