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What are genuine savings?

I've been talking about what banks mean when they say that you need to have proof of 'genuine savings'. Our website is undergoing a makeover so I've added the info here.

The short version is that proving genuine savings is just a matter of being intentional and genuine in a savings plan. I do list what a bank would generally consider genuine savings and what they don't. If this applies to you....enjoy the read :)

What is and isn’t considered to be genuine savings is quite convoluted and to make things more unclear, each lender operates under their own policies

The following types of savings are considered to be genuine savings if they add up to be more than 5% of the purchase price:

  • Savings held as a fixed amount or demonstrated to have been saved 3 months

  • Term deposits that have been untouched for 3 months

  • Shares or managed funds that have been held for 3 months

  • Sometimes equity in real estate although this varies by lender

  • Consistently and paid on time rent may be able to be included although not all lenders will accept it

  • Some salary sacrificing under the First Home Super Saver Scheme might also be acceptable

Some lenders will ask for a 6 months saving history instead of the normal 3 months as required by most lenders as this is to rule out a deposit from another source (ie informal loan from a friend) and simply added to it over three months to make it look like genuine savings.

How much do I need?

Lenders typically ask for a minimum of 5% of the purchase price for a home buyer and 10% of the purchase price for an investor.

The rest of your deposit can come from anywhere you like.

For example, if you were buying a home for $500,000, then you’d need $25,000 in genuine savings.

What isn’t genuine savings?

Having money in your savings account isn’t enough!

The banks want to see that you’ve planned and saved a deposit yourself because this shows to them that you’re likely to be a good borrower.

The following don’t count towards genuine savings:

  • Gifts

  • Inheritance

  • Savings plans

  • Tax refund

  • Lump sum deposits (proceeds from sale of property is an exception to this)

  • Bonuses

  • Selling your car or other assets

  • First Home Owners Grant (FHOG)

  • Funds held in a business account

  • Any borrowed funds e.g. a personal loan

  • Developer’s or builder’s rebates/incentives