Ultimate guide to genuine savings in Australia (2024)

If you're a first home buyer, your mortgage broker or bank has probably mentioned the need for "genuine savings" and you might be wondering:

Well, we've gone through all the banks' credit policy documents to pull together this ultimate guide to genuine savings that covers all of these questions.

What's the meaning of "genuine savings"?

"Genuine savings" are the funds that you’ve personally saved up over time. If you’re seeking a home loan with a relatively small deposit, lenders will often ask to see proof of “genuine savings” to get a sense of whether you’re financially responsible (or too risky to handover half a million dollars to).

Do I need genuine savings if I have a large enough house deposit?

No - you don’t need to demonstrate genuine savings with a large enough house deposit. However, the size of the house deposit required to avoid genuine savings depends on the lender. In general, if you don’t need to pay Lenders Mortgage Insurance (LMI) because you have a big enough deposit, then you won’t need to demonstrate genuine savings. For example:

  • ANZ doesn't require evidence of genuine savings if loan-to-valuation ratio (LVR) is ≤85%
  • Commbank doesn't require evidence of genuine savings if your loan-to-valuation ratio (LVR) is ≤90%
  • Macquarie doesn't require evidence of genuine savings if your loan-to-valuation ratio (LVR) is ≤85%
  • NAB doesn’t require evidence of genuine savings if your loan-to-valuation ratio (LVR) is ≤90%
  • Westpac doesn’t require evidence of genuine savings if your loan-to-valuation ratio (LVR) is ≤90%

How much genuine savings do I need?

If you need to demonstrate genuine savings due to the loan-to-valuation ratio (i.e., not a large enough house deposit), then major lenders in Australia will want to see genuine savings worth 5% of the property purchase price (excluding any Government fees, duties, or charges).

For example, if you’re looking to buy a first home for $600k and your loan-to-valuation ratio is above the genuine savings threshold (e.g., only a 5% house deposit with a 95% LVR), then you’d need to demonstrate $30k of genuine savings (i.e., 5% of $600k). This $30k might come from multiple sources, such as:

  • $20k house deposit savings held in your bank account for the last 3 months; plus
  • $5k of funds being withdrawn as part of the First Home Super Saver Scheme (FHSSS); plus
  • $5k from share investments held for more than 3 months.

Are my rental payments considered genuine savings?

Yes, rent paid is now considered genuine savings by all major lenders in Australia:

  • ANZ: Accepted - "New ANZ policy will see owner-occupier FHBs allowed to provide history of rental payments as evidence of their ability to consistently save…" with "…three consecutive months’ rental statements from the customer’s real estate agent, evidencing rent paid in the name of at least one of the borrowers…"
  • Commonwealth: Accepted - "Where Rent Payments are to be considered… 3 months satisfactory rental payment history"
  • NAB: Accepted - "We know it can be hard for prospective first home buyers to save for a deposit and rent at the same time, so we now recognise rental history as a form of ‘genuine savings’ in home loan applications"
  • Westpac: Accepted - "For those who are currently renting, minimum of 3 months of continuous rental history can be used as proof of genuine savings"

However, this is a relatively recent change over the last 10 years, so you still might have friends and family offering you (inaccurate) advice based on out-of-date info.

If you plan to use rent as part of your genuine savings, then it’s critical that you keep good records that demonstrate you have consistently paid your rent on-time for the last 3 months. If just one of your payments was more than 7 days late, then your rent paid may be excluded from your genuine savings.

What is (and isn't) considered genuine savings?

In general, assets held in your own accounts for longer than 3 months will be considered genuine savings (though this period seems to be getting shorter), especially if you demonstrate a consistent pattern of saving. In simple terms, your potential lender wants you to demonstrate that you can save and that you don’t blow all your money as soon as you get it.

Many first home buyers don’t have enough genuine savings when they start house hunting, so your mind might be starting to get creative on how you can demonstrate the genuine savings: Is the rent I’ve paid considered genuine savings? Is my tax refund considered genuine savings? If I sell my car, would that be included in genuine savings? If I ask my parents for a gift, would that be genuine savings? Would the First Home Owners Grant that I’m planning to get be genuine savings?

While exact policies differ from lender-to-lender, the table below is a good general guide on what's likely to be accepted as genuine savings. The table is sorted from most likely to least likely to be included in genuine savings for a first home buyer.

Source Likely to be accepted Typical conditions
Savings in bank account1,2,3,4 Highly likely If funds held for required period (e.g., >3 months)
Savings in term deposit1,2,3,4 Highly likely If funds held for required period (e.g., >3 months)
Equity in existing property1,2,3 Highly likely -
Proceeds from sale of property1 Highly likely -
Investments: shares1,2,4 Highly likely If funds held for required period (e.g., >3 months)
Proceeds from sale of investments1 Highly likely If funds held for required period (e.g., >3 months)
Additional super contributions1 Highly likely If funds are accessible (e.g., FHSSS Determination)
Accelerated loan repayments1,2,3 Likely If additional repayments beyond minimum
Rent paid3,4 Likely If you're a first home buyer and you've paid on-time for required period (typically 3-6 months)
Proceeds from sale of car1 Likely If funds subsequently held for required period (e.g., >3 months)
Bonus/commission from work1 Likely If deposited into yoru bank account
Tax refund3 Likely If deposited into your bank account
Dividends3 Likely If deposited into your bank account
Windfall: Inheritance1,2,3,4 Likely If funds held for required period (e.g., >3 months)
Windfall: Gifts1,2,3 Possible If funds held for >3 months and it’s a real gift (i.e., not a loan)
Deposits paid for off-the-plan property2,3 Possible If you have deposit receipts in your name
Funds held in business account1,2,3 Possible Some accept (e.g., Helia, Macquarie), but others don’t (e.g., Westpac)
First Home Owner Grant (FHOG)1,2,3 Possible Some accept (e.g., Helia), but others don’t (e.g., Westpac, Macquarie)
Borrowed funds (e.g., personal loan, credit card, loan from family)1,2,3,5 Unlikely Most don't accept, but some accept with low LVR and validation (e.g., Helia)
Investments: Crypto Unlikely Unclear as not explicitly ruled in/out in policies, but it would likely require an Australian-based account in your name at a minimum
Cash1,3,4 Very unlikely Unless cash deposited into an account for required period (e.g., >3 months)
Builder rebates/incentives2,3 Very unlikely -
Funds held in someone else's name Very unlikely -
Proposed sale of an asset (non-property)2 Very unlikely -
Proposed savings plan2,3 Very unlikely -

Footnotes
1 Helia | LMI underwriting standards and guidelines (May 2023)
2 Macquarie | Residential home loans credit guidelines (February 2024)
3 Westpac | LMI, Genuine Savings & Customer Contribution (May 2022)
4 CommBank | Third Party Application Checklist
5 Australian Financial Review | Westpac closes home loan loophole (January 2017)

How long do I need to hold funds to turn them into genuine savings?

Previously, lenders typically wanted to see you hold the funds for at least 3 months for them to be considered genuine savings. However, there’s been a recent trend towards lenders shortening the holding period required and the requirement now differs by lender:

  • Helia (one of the major lenders mortgage insurance providers) now seem to only require the funds to be there at the time of the application (i.e., no holding period of 3 months)
  • Commonwealth now only requires "evidence of the customer’s account(s) showing genuine savings for the 1 month period"

At what point in the home loan process do they check genuine savings?

Your lender will check for genuine savings when you submit your home loan application.

Ideally, you’ll want to ensure you’ve got your genuine savings sitting in an account in your name three months before you intend to submit a home loan application to give you access to the broadest range of lenders and most competitive rates. If you’re planning to use a gift, inheritance, or sale of a car, towards your genuine savings, you don’t want to leave this until just before you apply for a home loan otherwise they may be excluded from your genuine savings (or you’ll only be able to use certain lenders with looser requirements that may have higher interest rates).

How can I increase my genuine savings?

You can quickly turnaround your situation and meet the genuine savings requirements by:

  1. Determining how much genuine savings you’ll likely need based on your expected property purchase price and loan-to-valuation ratio (LVR)
  2. Estimating your current range of genuine savings based on two scenarios:
    • strictest requirements (e.g., 3 month holding period and only the “highly likely” sources from the earlier table being acceptable); and
    • looser requirements (e.g., 1 month holding period and all sources being acceptable except for the “very unlikely” sources)
  3. Identify how you’re going to close-the-gap to your genuine savings target range, such as:
    • Increasing your savings every pay day and not touching your house deposit savings account (LINK: a good financial coach can help!)
    • Selling your car, or other personal assets, and ensuring the deposit of funds is traceable to the sale of the asset
    • Building a good rental history (e.g., establishing a formal rental lease if currently informal, ensuring your name is on the lease if you took someone else’s spot, ensuring you consistently pay on-time as per the formally agreed frequency)
    • Asking very nicely for a gift from parents (if fortunate enough)
    • Ensuring any planned windfalls are received early enough to be counted (e.g., 3 months before home loan application)
    • Depositing any significant cash around the house into your bank account, so that it gets counted
    • Ensuring all your funds are sitting in accounts under your name (e.g., not sitting in a sibling’s offset account, partner’s savings account, unnamed cryptocurrency account, informal loan to a friend, etc.)
    • Checking whether you’ve previously made any additional super contributions that you could access (e.g., via FHSSS)
    • Identifying competitive lenders that will accept First Home Owner Grant and/or business accounts as genuine savings (see earlier table)

Do you need a hand rapidly building up your genuine savings?

We would love to help you smash your house deposit goals and genuine savings requirements.

Our financial coaches can help you save faster and buy sooner to avoid $50k+ of house price rises.

Book a free 15-minute call today to discuss how financial coaching could help and answer any questions you may have.