If you apply for a home loan, particularly if the loan is for more than 80-90 per cent of a property’s value, you’ll more than likely have to prove to lenders that you have a satisfactory amount of savings. The general rule of thumb is that you’ll need 5% of the property purchase price. This is to demonstrate your ability to funnel a portion of your income into repayments.
Although it can differ, in most cases lenders generally look for consistent additions to savings over a period of at least three months, and preferably longer in certain circumstances. This means that the following are not considered genuine savings:
- a cash gift
- an inheritance
- borrowed funds e.g. personal loan or credit card
- casino/other gambling winnings
- proceeds of the sale of a non-investment asset
- government grants and other finance offered as incentives
Can I still get a loan without genuine savings?
For those who don’t have any genuine savings but still want to obtain finance, there are options. These include:
- Guarantor loans – Having a guarantor on your loan may mean that no deposit is required, with the equity or asset the guarantor stakes standing in for a deposit.
- Other significant assets such as shares, managed funds and/or equity in residential property – Depending on your chosen lender, cash isn’t the only thing accepted as genuine savings. There are even situations where the sale of a vehicle can be considered as genuine savings if proved that it was owned for three months or more, or even accelerated repayments towards personal loans/credit cards.
- A strong rental record may see a lender allow you to forgo the genuine savings route – Some lenders will waive the requirements if a letter can be produced from a licensed real estate agent confirming that rent has been paid on time and in full for the preceding 3-6 months, as it highlights your ability to make repayments on time and on an ongoing basis.
I regularly write loans for customers who do not have genuine savings using the aforementioned policy exceptions. It’s just a matter of looking at an applicants full situation and knowing which lender is going to have the policies to suit what clients are trying to achieve. This knowledge can only be achieved through experience and keeping in constant communication with lenders to know what their policy niches are. I invite you to read all my First Home Buyer specific blog posts here.
Cairns Mortgage Broker – Jason Thomson is a Mortgage Adviser and Finance Broker based in Cairns with clients all around Australia. Client reviews featured on his website prove that Jason is a trusted industry professional, facilitating great outcomes for his clients. Using his wealth of experience in financial services, he thrives on delivering superior service. Jason is very approachable and is always looking for new clients to help in the often confusing world of finance and property. Offering a no fee service, you’ve got nothing to lose by having an obligation free chat with Jason today.