If you're looking to buy a home in Australia, you may have heard the term "5% genuine savings" mentioned when it comes to securing a home loan. In this article, we'll explore what 5% genuine savings means, what counts as genuine savings, and how much you need to save for a home loan. We'll also discuss why working with a mortgage broker like Steve Keramidas can help you navigate the complex home loan process and secure the best possible deal for your situation.
What is 5% Genuine Savings?
Many lenders in Australia require borrowers to have at least 5% genuine savings as a deposit for a home loan. Genuine savings are funds that have been saved over time, rather than borrowed from another source such as a personal loan or credit card. The 5% genuine savings requirement is a way for lenders to assess your ability to save money and manage your finances over time, as they want to ensure that you have the financial discipline to make regular repayments on your loan and avoid defaulting.
Why do lenders require 5% genuine savings?
It's a way for them to assess your ability to save money and manage your finances over time. Lenders want to ensure that you have the financial discipline to make regular repayments on your loan and avoid defaulting.
What Aren't Genuine Savings?
It's important to note that not all funds count as genuine savings. For example, funds received as a gift, inheritance, funds from the sale of your car/boat, or lump sum payment are not considered genuine savings. Similarly, funds obtained through a personal loan, credit card, or other borrowed source are not considered genuine savings.
Genuine Savings vs. Regular Savings
It's also important to understand the difference between genuine savings and regular savings. Genuine savings refer specifically to funds that have been saved over time and can be used as a deposit for a home loan. Regular savings, on the other hand, refer to funds that you've saved but may not be able to use as a deposit, such as funds that have been set aside on your relative's account for a holiday or emergency expenses.
How Much Saving is Enough for a Home Loan?
The amount of savings you need for a home loan will depend on the purchase price of the property you're interested in. As a general rule, lenders require a minimum deposit of 5% of the purchase price, plus additional funds to cover fees such as stamp duty, conveyancing, and Lenders Mortgage Insurance (LMI).
For example, if you're interested in buying a property worth $500,000, you'll need to have at least $25,000 in genuine savings (5% of the purchase price) plus additional funds to cover fees. The exact amount of fees will vary depending on the state or territory you're buying in and the specifics of your loan, but you can expect to pay several thousand dollars in fees in addition to your deposit.
How Can a Mortgage Broker Help?
Navigating the home loan process can be complex and overwhelming, especially if you're a first-time buyer or have a unique financial situation. This is where a mortgage broker like Steve Keramidas can be a valuable asset. A broker can help you explore your options and find a lender that is willing to work with your unique financial situation. They can also help you understand the requirements for genuine savings and identify other options for meeting the deposit requirements.
Working with a mortgage broker can also help you save time and money. Brokers have access to a wide range of lenders and loan products, which means they can help you compare loans and find the best possible deal for your situation. They can also help you navigate the application process and ensure that you're getting the best possible interest rate and loan terms. If you're struggling to meet the 5% genuine savings requirement, it's important to contact a mortgage broker like Steve Keramidas. A broker can help you explore your options and find a lender that is willing to work with your unique financial situation.
While a 5% deposit may sound manageable, it can be challenging for some borrowers to save that amount of money. However, there are some ways to avoid the 5% genuine savings requirement without having to save the full amount yourself:
Gifted deposit: If a family member or friend is willing to gift you the deposit that is more than 10% this may be accepted by some lenders. However, it's important to note that some lenders may require you to provide evidence that the gift is not a loan and that there are no expectations of repayment.
Guarantor loan: If you have a family member who is willing to act as a guarantor, you may be able to secure a loan with a lower deposit. However, this option carries some risks, as the guarantor is liable for the loan if you default.
In summary, 5% genuine savings is a requirement for many home loans in Australia, and it's important. Chat to the experts from Mortgage Compare Plus for reliable and fast help.
Disclaimer: This article provides general information only and may not reflect the publisher’s opinion. None of the authors, the publisher or their employees are liable for any inaccuracies, errors or omissions in the publication or any change to information in the publication. This publication or any part of it may be reproduced only with the publisher’s prior permission. It was prepared without taking into account your objectives, financial situation or needs. Please consult your financial adviser, broker or accountant before acting on information in this publication.