Securing a home loan can be a daunting task, especially when it comes to understanding the concept of genuine savings. Genuine savings are crucial for obtaining a higher Loan to Value Ratio (LVR) loan, as lenders require proof of consistent savings behavior. This article delves into the nuances of genuine savings, exploring what qualifies as genuine savings, why they are necessary, and alternative options if you lack the required savings.
Genuine savings refer to the funds that a borrower has accumulated over time, demonstrating their ability to save consistently. These savings are essential when applying for a home loan, particularly if the LVR exceeds 85% of the property's value. Lenders typically require evidence of these savings through account statements over a period of at least three months.
Lenders use genuine savings as an indicator of a borrower's financial discipline and ability to manage loan repayments. When the LVR is greater than 85%, lenders require proof of genuine savings to mitigate the risk associated with lending a higher percentage of the property's value. According to the Australian Prudential Regulation Authority (APRA), high LVR loans are considered riskier, which is why lenders demand evidence of genuine savings source.
Genuine savings can originate from various sources, provided they meet the lender's criteria. Here are some common sources:
Certain funds are not considered genuine savings, including:
The required amount of genuine savings varies based on the type of property you intend to purchase:
If you lack the necessary genuine savings, some lenders may consider alternative options, such as:
Not all lenders make genuine savings a mandatory requirement. Consulting with a professional finance broker can help you find lenders who offer deposit-free home loans. These brokers have the expertise to navigate the complexities of home loans and can assist you in securing a loan even if you lack genuine savings.
Understanding the importance of genuine savings is crucial for anyone looking to secure a home loan with a high LVR. While genuine savings demonstrate financial discipline, there are alternative options available for those who may not meet the standard requirements. By exploring all available options and seeking professional advice, you can increase your chances of obtaining a home loan that suits your financial situation.
For more information on home loans and genuine savings, visit the Australian Securities and Investments Commission (ASIC) for comprehensive guidance.
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