All About Loans News: What are ‘Genuine Savings’?

When you apply to the bank for your home loan you will need some savings to put towards your deposit, however it's not just about the amount of savings you have.

The lender you apply for your loan to will also care about your savings processes.

They will ask you for a deposit of ‘genuine savings’, and you may be wondering what exactly this means.

For savings to be classified as genuine, most banks will look at three months of your bank statements to see that regular deposits are being made towards your savings. While it’s expected that your bank balances will fluctuate during each payment period as you put money towards your regular expenses, lenders generally like to see an upward trend.

The reason lenders examine your savings history is because it gives them an indication of your financial discipline, and how well you will be able to commit to your loan repayments.

In some cases however, you won’t accumulate the savings for your deposit through a regular savings pattern. You may acquire a lump sum of money, which could be a gift from your parents, an inheritance or possibly the sale of an asset like a car.

Whether or not you can use this as a deposit depends on the size of the lump sum.

Depending on the lender, if your lump sum is less than 10% to 15% of the price of your property, you will need to hold the funds in a savings account for three months before they will be considered genuine.

However, sometimes when you are buying your home you have your time-frames dictated to you by real estate agents and other property market factors.

If you are on a tight time-frame there are some ways around genuine savings policies.

For example some lenders will accept a letter from your rental agent giving 12 months of rental history as evidence of your financial responsibility.

While it’s always best to have savings behind you, don’t be daunted by bank policy. If you have your eyes on a home, but are unsure of whether your financial position is strong enough to apply for a loan, then a finance broker is your best friend.

We will often be able to find a solution that meets your loan needs as well as the bank's policies. While genuine savings are important, we focus on the full picture and displaying your financial position to the bank in the best possible light.

Call 0732525208 to receive free advice today!