What First Home Buyers Need to Know About Genuine Savings

With the property market as hot as it is right now, Sunshine Coast first home buyers are asking “how much of a deposit do I really need” to buy property? We have some answers for you that might help you achieve your property dreams sooner. Please read on to learn more about genuine savings and home loan applications.

What are genuine savings?

Genuine savings are your savings that you build up gradually over at least three months. This means tax rebates, an employment bonus, an inheritance, or any other kind of lump sum does not count as genuine savings. Your genuine savings could look like:

  • A rainy day fund built up over at least three months
  • Money held in a term deposit for at least three months
  • Salary sacrificed with the First Home Super Saver Scheme
  • Shares or managed funds held by you (the borrower) for at least three months
  • Even some banks use your rental history as proof

Having genuine savings evidence shows your lender you have good savings habits and that you will be able to make your home loan repayments in future.

How can genuine savings help you get a home loan?

Ideally, a 20% deposit saved ready to pay up front in cash will put any home buyer in a position to gain financial pre-approval and avoid lenders mortgage insurance. However, with property prices increasing in Australia, a full 20% deposit can be unachievable for many first time home buyers.

If you have a home loan deposit of less than 20%, some lenders will ask to see evidence of genuine savings. By providing this evidence, the lender can assess your ability to make repayments while accepting a lower upfront deposit.

Can I get a loan with less than 20% deposit?

The best advice we can give if you have less than 20% deposit is to see an experienced mortgage broker. We can assist you with understanding your financial situation and your best chances to get your home loan approved.

While most lenders do offer loans to home buyers with a smaller deposit, there are conditions required like lenders mortgage insurance attached to these “higher risk” loans.

With the assistance of a mortgage broker with access to a full range of lenders with varying requirements, first home buyers on the Sunshine Coast have the best chance at getting a home loan approved.

Tips to build up genuine savings

While building up a savings nest egg is not always an easy task, there are a few tips and tricks that can help. 

Here are just some ways you can fast track your savings:

  • Budget, budget, budget! We know you have probably hear this before, but, drawing up a budget really can help. It doesn’t have to be super detailed. A budget is simply a way to review what you’re spending right now and see where you can cut back and divert more into your savings.
  • Save on bills. Take a really close look at your regular bills. Are you paying too much for electricity? Could you be on a cheaper home internet plan? Shopping around on bigger household expenses such as these could help you save more money in the long run. This “extra” money put away into savings regularly will give you genuine savings evidence.
  • Compare insurance quotes. Insurance is another big expense for many. To cut down on what you pay, you could gather quotes from other providers to see if there are any savings to be had. 
  • Have fun for free! Try to avoid comfort spending and look for fun things you can do for free while you are trying to build your genuine savings for a few months. This could be going to the park or a museum. Or if you’re stuck at home during a lockdown, learning a new skill using free online tutorials.

Lastly, you might even consider opening a savings account for your stash. These days savings accounts come with so many great features, they can actually encourage you to save more! Some of these include automatic bank transfers, a roundup tool, reminders, savings buckets and so forth.

Whether you have genuine savings evidence already or if you are at the start of your savings journey, talk to us about what you need for home loan approval and let us help you get on the right track sooner.

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