If you apply for a home loan, particularly if the loan is for more than 80 per cent of a property's value, you'll probably have to prove to lenders you have a satisfactory amount of savings, demonstrating your ability to funnel a portion of your income into repayments.
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Although it can differ, lenders generally look for consistent additions to savings over a period of at least three months and preferably a year or more. This means that the following are not considered genuine savings:
- a cash gift
- an inheritance
- casino/other gambling winnings
- proceeds of the sale of a non-investment asset
- government grants and other finance offered as incentives
For those who don't have genuine savings but still want to obtain finance, there are options and these include:
- Guarantor loans - Having a security guarantor on your loan may mean that no deposit is required, with the equity or asset the guarantor stakes standing in for a deposit.
- Other significant assets such as shares, managed funds and/or equity in residential property - Depending on your chosen lender, cash isn't the only thing accepted as genuine savings. There are even situations where the sale of a vehicle can be considered as genuine savings if proved that it was owned for three months or more.
- A strong rental record may see a lender allow you to forgo the genuine savings route - Some lenders will waive the requirements if a rental ledger can be produced from a licensed real estate agent confirming that rent has been paid on time and in full for the preceding 12 months, as it highlights your ability to make repayments on time and on an ongoing basis.
- In some cases keeping a cash gift or inheritance for three months can then be considered as meeting the requirement of genuine savings
I regularly write loans for customers who do not have genuine savings using the aforementioned policy exceptions, with knowledge achieved through experience and keeping in constant communication with lenders to know what their policy niches are.
Accredited finance brokers are trained to have knowledge of a broad spread of products from multiple lenders, so they'll be able to match you with the right lender and loan. Arrange a time to discuss your circumstances today.
Olympia Andronicos is a credit representative (507463) of BLSSA Pty Ltd ACN 117 651 760 (Australian Credit Licence 391237). Choice Finance Specialists 0418 690 628.