Whether savings is genuine or non-genuine can sometimes make a difference between an approval or a decline but most of the time the biggest difference is more to do with the cost of mortgage insurance and the relevant interest rate.
Genuine Savings is an established savings pattern over a period of 3 months. Savings are considered genuine when:
- Has come from any source and remained untouched in a bank account for a min 3 months or
- Sale of shares, if ownership of shares were for longer than 3 months or
- Proceeds from the sale of Real Estate where the borrower was an owner of the property being sold or
- Redraw on an existing loan where the loan is in the borrowers name or
- Bonuses from an employer as long as bonus is not used as income
Non Genuine Savings
Non Genuine Savings is where the deposit has come from any other source that is not considered to be ‘Genuine’:
- First Home Owners Grant
- Gifts or Inheritances
- Builder & vendor discounts or incentives
- Tax Returns
- Sale of vehicle or asset other than property or shares
- Savings held in the name of a business or company
- Savings is borrowed from any source
The grey area
Non Genuine savings can sometimes be treated as ‘Genuine’ in the following situations:
- Borrower can prove a reliable rental history with a licensed agent for at least 6mths with a lease in their own name
- Borrower can prove extra repayments made on an existing loan (including personal loans) equals the amount of non-genuine savings
- Borrower can prove with rates notice and loan statements, they have equity in an existing real estate property
- Just because genuine savings is the preferred source for most lenders this does not mean borrowers cannot get a loan if their savings is non-genuine.
Having enough savings to begin with is more important than where it came from.