The difference between genuine and non-genuine savings

When applying for a home loan you’re asked to provide a lot of different information, including how much money you’ve saved. You may also be asked questions about how you’ve saved your deposit, as lenders will need to consider whether you have the capacity to pay your home loan repayments. There are two types of savings a lender will consider, known as ‘genuine’ savings and ‘non-genuine’ savings. What's the difference between them?

Genuine savings

Genuine savings means the money that you have saved up gradually over time. So if you’ve diligently put away $1,000 each month over two years you’ll have $24,000 to include on your home loan application as a deposit. Generally lenders require this deposit money in a separate account saved over three months. By saving a little every month, you can demonstrate that you are able to budget and have a habit of saving. Sometimes just showing that you can save regularly for even as little as three months is enough to show genuine savings.

Non-genuine savings

If you haven’t been able to save a little every month, it is still possible to have a deposit from what are called non-genuine savings. These are sums of money that may have been gifted to you or received as a lump sum from a transaction, but have not been genuinely saved over time. For example, you may have inherited $5,000 from your aunt, received a tax refund, sold your car, or received a first home owner grant and monetary gifts from a family member – all are considered non-genuine savings.

Gifts and lump sums: non-genuine or genuine?

Lump sums that have been gifted to you are usually considered to be non-genuine savings. However, if you receive these funds and put them into a savings account where they are left untouched for generally three months minimum, then these funds can actually be considered to be genuine savings by a lender. Keep this in mind if you receive a lump sum.

What can I do with non-genuine savings?

If your savings are considered to be non-genuine you may still be able to use those funds to purchase your new home because other factors may be considered to determine if you are eligible for a home loan. Every lender has different rules around deposit requirements, so be sure to check with your Mortgage Broker to determine what is accepted as savings.

Want to know more about the home loan products that are available in the marketplace? Talk to your trusted Mortgage Broker today.

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