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What counts as genuine savings when applying for a home loan?

Origami dollar seedling being watered with coins

When you’re applying for a home loan, your prospective lender will look at a range of factors in determining your ability to service the loan. One of these is your genuine savings. 

Genuine savings give the lender an idea of how good you are at managing your money, thereby demonstrating how much of a liability lending to you may be.

You may be asked by a lender to show proof of genuine savings during the home loan application process.

But what really counts towards genuine savings?

What are genuine savings?

Genuine savings are defined by a clear pattern of consistent saving over time.

For example, if you save $1,000 a month for 12 months, your genuine savings would be $12,000.

Why do lenders look for genuine savings?

Lenders want to see that you’ve been consistently saving for at least three months (bonus for anything longer), as it’s not only a measure of your enthusiasm for home ownership, but a demonstration of your commitment to financial stability. And lenders love stability.

Genuine savings can make up a portion of your home loan deposit, as well as serve as a demonstration that you’ll be able to make mortgage repayments.

Examples of genuine savings

Some examples of what lenders may call genuine savings include:

  • Savings you have accumulated or held for more than three months
  • Term deposits you’ve held longer than three months
  • Contributions you’ve made through the First Home Super Saver Scheme.

Genuine savings vs non-genuine savings

Non-genuine savings are generally funds you’ve been gifted – or at least money that you haven’t saved up yourself over time. 

The reason non-genuine savings aren’t treated with the same smile as genuine savings is because they don’t demonstrate your budgeting or saving ability. 

Sure, you can use your non-genuine savings to bulk up your deposit, but it won’t have as much convincing-power as your genuine savings.

Examples of non-genuine savings

Some examples of what lenders may consider non-genuine savings include:

  • Cash gifts 
  • Inheritance 
  • Tax refunds
  • Bonuses 
  • Equity in an existing property
  • Money received from the sale of an asset
  • Money received from the sale of shares 
  • First Home Owners Grant
  • Borrowed money
  • Short-term savings

How much genuine savings do you need for a home loan?

Generally speaking, the larger your deposit is, the less genuine savings the lender will be looking for.

For example, if your loan to value ratio (LVR) is 80% or less – making for a 20% deposit – you might not actually need to show genuine savings. 

However, for those with an LVR of 85–95% or above, the likelihood of a lender asking for proof of genuine savings increases.

How can you increase your genuine savings?

The closer your regular savings amount looks to the sort of number you’d find on a home loan repayment bill, the better. So, what can you do to make your genuine savings history look strong?

If your savings are looking a little skinny, then you might need to create a new budget. Here are 25 odd and easy hacks for saving money, as tested by the Mozo editorial team, which can give you an idea of ways you can trim the fat on your budget. 

Or, check out some high interest savings accounts, so you can watch your future home loan deposit grow. 

In the meantime, those thinking about buying should do their research before jumping into an application. Check out Mozo’s home loan guides and lay the foundations of your property purchasing journey, or have a look at some of the current home loan rates on the market.

Jack Dona
Jack Dona
Money writer

Jack is RG146 Generic Knowledge certified, with a Bachelor of Communications in Creative Writing from UTS, and uses his creative flair to cut through the financial jargon and make home loans, insurance and banking interesting. His reader-first approach to creating content and his passion for financial literacy means he always looks for innovative ways to explain personal finance. Jack's research and explanations have been featured in government publications, and his work is regularly featured alongside major publications in Google's Top Stories for Insurance.