5% Genuine Savings Home Loan
Most lenders require at least a 5% deposit that has been saved for at least 3 months. This is referred to as genuine savings. But what if a family member provides you with a 5% deposit in the form of a gift? Do you have to wait for 3 months before you can make a purchase?
Non Genuine Savings with Rental History
If your 5% deposit comes from a gift from your family, sale of an asset, bonus from work, a tax refund, sale of a car or an inheritance, you will need to have the fund sit in your account for 3 months to establish genuine savings. But what if you want to purchase a property today and the 3 months’ savings has not been established yet? The 5% deposit is now classified as non-genuine savings. Fortunately, there are lenders in the market who will lend as long as the following guidelines are met.
If you have been renting for the last 12 months, there are major lenders in the market who will consider rental history as proof of genuine savings even if the 5% deposit has not been saved for 3 months. These lenders recognise the difficulty of you paying rent and saving at the same time.
These lenders will require you to provide a tenant’s ledger showing 12 months of rent history therefore it is important that the property you are renting is managed by a licensed property manager. The loan can go up to 95% of the value of the home and loan mortgage insurance can be added on top of the loan. If you want to know how loan mortgage insurance can help you purchase your home sooner, click on this link.
Scenario: A couple who have been renting for more than 12 months wishes to purchase a property for $500,000. Parents have offered to provide the $25,000 or the 5% deposit as a gift for the purchase. In this scenario, banks will lend the 95% even if the couple did not save the $25,000 for at least 3 months. This is because the couple’s rental history has satisfied the condition of genuine savings.
What is Non Genuine Savings with Rental History?
What if I have a 10% deposit with No Genuine Savings History?
This is a great situation to be in. I have three major lenders in the market who will lend up to 90% of the value of the home without proving the 3 months 5% genuine savings history. With this choice of lenders, you get very competitive interest rates and excellent loan products. At 90%, the loan mortgage insurance is much less. The only thing left for you to worry is to find that dream home.
What if Mum and Dad can help?
First Home Buyers with no deposit can use their mum and dad to assist. Mum and Dad have a fully paid property in which they live in. Kids can get the 20% of their purchase plus the cost of stamp duty and other costs and fees related to the purchase from the equity of their parent’s home. The other 80% will be secured by the property the Kids are purchasing. It is important that the Kids are able to service the full 100% of the loan. This scenario will save the First Home Buyer Kids the cost of Loan Mortgage Insurance which can amount to thousands. Depending on lender, this loan is called Family Guarantee, Parental Guarantee or Family Pledge.
Should Kids need to provide proof of 5% Genuine Savings?
The 5% Genuine Savings Policy no longer applies with the Family Pledge scenario.
Originally published November 5, 2018 8:00:00 AM, updated November 20 2018