The difference between genuine and non-genuine savings

Loan, Accidents and Disasters, Accountancy, Finance, Piggy Bank 1184469841

When applying for a home loan you’ll be asked to provide a lot of different information, including how much money you’ve saved.

These savings will be the deposit that you put towards the purchase of your new home. You may also be asked questions about how you’ve saved your deposit. This might seem a bit nosey at first, it’s one of the ways some lenders consider whether you’ll be able to cope with the financial commitment of a home loan.

Your hard-earned savings will be classified as either ‘genuine’ or ‘non-genuine’ savings. What's the difference between them and what does it mean for you? Find out below.

What are genuine savings

What are genuine savings?

Put simply, genuine savings is money you have saved up over time. Lenders want to see that you are capable of building savings, as this can demonstrate your ability to manage money – and might indicate you’ll be a good borrower.

So, for example, if you’ve diligently put away $250 each month over two years, you’ll have $6,000 (plus any interest) towards a deposit. This will be classed as genuine savings as you’ve accumulated them over time.

Sometimes just showing that you can save regularly (for even just three months) is enough to demonstrate genuine savings. Likewise, stocks and shares can often be considered genuine savings if they have been held for at least six months.

What are non-genuine savings

What are non-genuine savings?

Non-genuine savings is money that you’ve recently acquired that hasn’t been saved by yourself or been in your possession for at least three months. This could be through an inheritance, a gift, funds from selling a large asset, or if the bank of mum and dad are funding your deposit.

 Non-genuine savings can include: Gifts and inheritance, Equity in an existing property, Tax refunds, Bonuses, Sale of an asset, Sale of shares

Tip: Non-genuine savings aren’t ‘non-genuine’ forever. If the non-genuine savings are held in your account for at least three months, then they could be classified as genuine savings.  

What can I do with non-genuine savings

What can I do with non-genuine savings?

If your savings are non-genuine then you may still be able to use those funds towards your deposit – however this does vary lender to lender. At Pepper Money, we accept 100% gifted deposits on some of our home loan options, meaning you can use non-genuine savings for your full deposit.
How much savings do you need to buy a house

How much savings do you need to buy a house?

Each lender has different rules around their deposit requirements, so be sure to check with your lender to determine what are accepted as savings. At Pepper Money, we have options to allow you to use a 100% gifted deposit, and can lend up to 80% of the property value  -  use our borrowing power calculator will show you much you could borrow.

How much genuine savings do I need for a home loan?

Every lender is different. We don’t require genuine savings for some of our loans. However, other mainstream lenders may want to see a minimum of 5% in genuine savings as part of your home loan deposit. This is to demonstrate your ability to save while meeting your ongoing living expenses. It shows good money discipline and will aide lenders in their assessment of your home loan application.
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You are protected by responsible lending laws. Because of these protections, the recommendations given to you about home loans are not regulated financial advice. This means that duties and requirements imposed on people who give financial advice do not apply to these recommendations. This includes a duty to comply with a code of conduct and a requirement to be licensed.

All loan applications are subject to the lender completing responsible lending checks and considering the borrower’s individual circumstances. Terms, conditions, fees and charges apply. Information provided is factual information only and is not intended to imply any recommendation about any financial product(s) or constitute tax advice. If you require financial or tax advice you should consult a licensed financial or tax adviser.

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