What is 5% genuine savings?
When applying for a loan with less than a 10% deposit, Lenders and Mortgage Insurers want to see that a minimum of 5% of the value of the property has been saved. Saving the deposit demonstrates to the Lender that you are committed to the loan and have been disciplined with your money and have been able to put aside funds whilst budgeting for your other household costs such as rent, utilities, food and day to day expenses.
Genuine savings is a common term used by Lenders refers to viable funds that can be put towards your loan. The following examples are often classed as genuine savings and must be held in the borrower’s name:
- Savings in a savings account bearing your name that you have held for more than three months
- Any term deposits you have held for at least three months
- Managed funds and shares held for more than three months
- Equity in residential property from previous property purchases.
The most important part when applying for a loan is showing the paper trail as how the money has been accumulated, and that it is your money. It is usually a condition of applying for the loan that you provide bank statements for your accounts to prove that you have the funds to contribute towards the property and that the money has been saved.
There are options available for ‘non savings loans’ and some Lenders may consider proof of consistent rent payments as genuine savings. Speak to us to see what we can do for you.