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With the Tightening of Credit Policy - Banks are now requiring Genuine Savings

- Thursday, April 30, 2009
Definition of Genuine Savings 

Genuine savings is demonstrated where supporting records in the name of the applicant(s); confirm the applicant(s) has accumulated a minimum of 5% of the purchase price (3% for first home buyers) by way of progressive and regular savings over a period of not less than 3 months prior to the time of application. 

Any lump sums / large deposits are excluded unless they can be clearly shown via documentary evidence to come from the sale of an appreciating asset (e.g. shares or real estate) that had been held prior to their disposal for a minimum of 6 months. 

If the 3% / 5% minimum savings was already held 3 months prior to the application, and there has been no subsequent progressive and regular savings since, the customer must be able to demonstrate that the savings have been existent for 6 months prior to the application. 

Gifts from any source are excluded from genuine savings, as gifts do not in any way demonstrate the ability of an applicant to accumulate assets. If family support is evident (historically via a gift), then a Deposit KickStart (Family Equity Loan) loan should be considered in the first instance. 

Whilst the FHOG remains as an acceptable source of borrower’s contribution, it does not qualify as genuine savings.

Other exclusions from genuine savings:

  • Advances on wages/commission from an employer
  • Inheritance
  • Financing of a deposit 
  • Builder discount/finance
  • Vendor discount/finance
  • Proceeds from sale of motor vehicles
  • Windfall gains
  • One-off government payments (e.g. baby bonus, stimulus package payments)

If genuine savings cannot be demonstrated as per the above, the LVR must be less than 90% + lenders mortgage insurance.

Should you wish to discuss your own situation in applying for finance please do not hesitate to contact us.

David Carruthers is a credit representative (Credit Representative Number [400226]) of BLSSA Pty Ltd (Australian Credit Licence No. 391237).