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.
"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).
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:
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:
Yes, rent paid is now considered genuine savings by all major lenders in Australia:
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change over the last 10 years, so you still might have friends and family offering you (inaccurate) advice based on out-of-date info.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.
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)
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:
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).
You can quickly turnaround your situation and meet the genuine savings requirements by:
We would love to help you smash your house deposit goals and genuine savings requirements.
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