The majority of lenders/credit providers require you to prove that you have saved a 5% deposit before they will approve your home loan application. If, however, like many other Australians, you find yourself in a position where you have the money for a deposit, but you have not saved the money yourself and you still want a home loan. Then consider a non-genuine savings home loan.
What are Non-Genuine Savings?
If your deposit money is coming from any of the following sources, the lenders/credit providers will classify your deposit money as being non-genuine savings:
>> A Non-Refundable Gift from your Parents
>> An Inheritance from a Grandparent
>> A Large Tax Refund
>> Proceeds from the Sale of an Asset (e.g. car, motorcycle or boat)
>> Some Form of Windfall
>> Advances on Wages/Commissions from your Employer
>> First Home Owners Grant (FHOG)
>> Compensation Payouts
>> Borrowed Deposit
>> Builder/Developer Incentives
The situations listed above are very complicated. There are some lenders/credit providers who will accept these deposit sources as genuine savings. If you are currently renting your property, your rental history will be considered in few circumstances.
Are Non-Genuine Savings Loans more expensive?
No, there is no difference in loan and LMI pricing with any lender/credit provider if you are borrowing 85% of the property value or less.
If you are borrowing up to 90% of the purchase price than the majority of lenders/credit providers will have the same rates and fees for a loan as they do for people who have saved a deposit.
For loans up to 95% of the purchase price, some lenders/credit providers will charge a slightly higher Lenders Mortgage Insurance (LMI) premium if you cannot prove it.
Can I get a Home Loan without Genuine Savings?
Recently, some lenders have begun to offer 95% home loans without any proof of savings. The home loan is only available to people who are in a strong financial position. To qualify for this home loan, you must meet the following minimum requirements:
>> You must be paying your rent on time (if you are renting)
>> You must have stable employment
>> If you are self-employed, you will probably need to demonstrate your financial status over the past 2 years as a minimum
>> You must have a clean credit history (you must be free of any defaults, adverse listings and must not have too many credit enquiries)
>> You must have an excellent credit score
>> You must not have too many consumer debts such as credit cards and personal loans
>> You must be able to afford the debt comfortably.
So, don’t worry if you cannot manage to show proof of genuine savings. You can obtain non-genuine savings home loans easily by fulfilling the above mentioned requirements.