WHAT IS GENUINE SAVINGS AND WHY IS IT SO IMPORTANT?
Genuine savings is a common term in the home loan industry. It refers to the type of acceptable savings that can be put toward your loan deposit. If you want to borrow more than 80-90% of the properties value, you will be required to show the lender genuine savings. However, there are lenders that don’t require it, so exemptions can apply.
These savings usually need to be at least 5% of the property value at a minimum. In some circumstance, you may meet the requirements for only 2%. These savings show the lender how committed you are to the purchase.
This is important because of something called Lenders mortgage insurance (LMI). The insurer gives protection and pays the lender if you default on the loan. This is why insurers have such strict genuine savings policies, to further protect themselves. As the insurer is taking the risk, their rules are stricter than the banks.
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Disclaimer: Your full financial needs and requirements need to be assessed prior to any offer or acceptance of a loan product