When you’re on the journey to purchasing a home and require a loan, one crucial aspect that lenders will assess is your ability to save. Specifically, they will look at what is known as 5% genuine savings.
What Does 5% Genuine Savings for a Home Loan Mean?
Most lenders require borrowers to demonstrate genuine savings of at least 5% of the proposed purchase price from their own income or other verifiable sources, where the Loan-to-Value Ratio (LVR) is greater than 90%. Evidence of genuine savings is not required for property purchases with an LVR less than or equal to 90%.
What is Considered 5% Genuine Savings?
The types of genuine savings accepted can vary by lender and are subject to change. Below is a list of what most lenders might consider acceptable when the funds are held in at least one borrower’s name for 3 months or more:
- Funds/savings in a bank account
- Term deposits
- Shares or managed funds
- Equity in existing property
- Sale of assets
While not every lender considers the following list to be acceptable genuine savings, some lenders do:
- Gifts from family members
- Bonus or commission
- Tax refunds
- Inheritance
- Rental payment history
- Accelerated loan repayments
- Non-preserved superannuation
- First Home Super Saver Scheme (FHSSS)
- First Home Owner Grant (FHOG)
What is Considered 5% Genuine Savings?
- Borrowed funds/deposits (proceeds from personal loans or other borrowings)
- Builder’s rebates/incentives
- Marketing/cash-back offers
- Windfall gains (gambling, compensation, etc.)
How Triple M Finance Can Help
Understanding and meeting the 5% genuine savings requirement is a vital step in securing a home loan. Navigating this requirement can be challenging, whether you’re a first-time homebuyer, looking to upgrade, or an investor. We provide the expert guidance and support you need to confidently move forward on your path to realising your homeownership dreams sooner.
Get in touch today!