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Are you preparing for a home loan application? Understanding genuine savings is essential when putting your application together, as these savings reflect financial discipline and offer lenders confidence in your ability to manage repayments.
But what qualifies as genuine savings, and why are they so important?
What is Genuine Savings?
So, what is genuine savings? Genuine savings refer to funds you’ve consistently accumulated over time. These savings are typically held in your account for at least three months, showcasing steady financial habits. Examples of genuine savings include:
- Regular deposits into a savings account.
- Term deposits are maintained for a minimum of three months.
- Equity in an existing property.
Funds like monetary gifts or one-off windfalls, while helpful, are considered non-genuine savings. These don’t demonstrate the same financial stability and consistency lenders require.
Why Are Genuine Savings Crucial for Home Loans?
Lenders use genuine savings to assess your financial reliability. For a genuine savings home loan, showing a solid savings history strengthens your application and increases approval chances. Key benefits include:
- Increased Credibility: Lenders trust borrowers with proven saving habits.
- Better Loan Terms: A good savings record may secure lower interest rates and better terms.
- Financial Safety Net: Genuine savings provide extra funds for unexpected costs, reducing financial strain.
For first-time buyers, these savings demonstrate responsibility and can ease the path to home ownership. If you're concerned about meeting savings requirements, options like Guarantor Home Loans could provide alternatives.
Building Genuine Savings
Establishing genuine savings takes time, but a strategic approach can help you succeed. Here’s how:
- Automate monthly deposits into a dedicated account.
- Review your expenses and cut unnecessary spending.
- Consider term deposits to lock in your savings and earn higher interest.
Start small if necessary—consistent, regular deposits matter more than the amount. Lenders look for steady habits, so focus on maintaining momentum.
Alternatives to Genuine Savings
If meeting genuine savings criteria feels challenging, don’t worry—there are alternative options that may work for your situation. Lenders understand that everyone’s financial journey is different, and they often have flexibility for those who don’t fit the traditional savings mould. Here are some alternatives to consider:
Rental History: If you’ve been renting for at least 12 months and have consistently made on-time payments, this can sometimes be used as evidence of financial responsibility. Lenders may view a strong rental history as demonstrating your ability to manage regular financial commitments, making it a potential substitute for genuine savings.
Non-Genuine Savings: Gifts from family, inheritance funds, or one-off bonuses might not meet the strict definition of genuine savings, but they can still contribute to your deposit. While some lenders may accept these funds, they may require additional documentation, such as a statutory declaration confirming the gift is non-repayable.
Guarantor Support: If you have a family member willing to act as a guarantor, their equity in a property could provide the security needed for your loan. This can be particularly helpful for first-time buyers or those struggling to meet savings requirements.
Government Schemes: Depending on your location and circumstances, government initiatives like first-home buyer grants or deposit schemes might provide the boost you need. These programs are designed to help individuals enter the housing market with less financial strain.
While these alternatives can open doors, it’s important to understand the fine print. Each option comes with its own conditions and potential risks. For instance, relying on a guarantor means their property could be at risk if you default on your loan. Similarly, using non-genuine savings might limit your lender options or result in stricter loan terms.
The best way to navigate these alternatives is by seeking advice from a finance expert or mortgage broker.
How Genuine Savings Impact Your Financial Goals
Beyond securing a home loan, genuine savings represent broader financial stability. These savings showcase your ability to manage money and can set the foundation for future wealth-building. For example, they demonstrate preparedness for property maintenance, unexpected expenses, or even additional investments.
Expert Guidance for Your Home Loan Journey
Understanding the role of genuine savings can simplify your path to homeownership. At Inovayt, we specialise in guiding buyers through the home loan process. From tailored advice to exploring flexible options like bridging loans or self-employed home loans, we help you achieve your goals.
Our experts can also guide you on strategies to build savings and secure approval, ensuring you’re prepared at every step. Everyone's financial journey is unique, and our approach reflects that.
Take Control of Your Home Loan Application
Ready to take the next step? Inovayt’s experienced team is here to support you. Whether building genuine savings or exploring Guarantor Home Loans, we’ll help you secure the...
