If you’re applying for a home loan, beware that your lender will assess your savings to ensure that you are capable and reliable in making your monthly repayments. 

When talking about home loans, your savings automatically take centre stage in the conversation. There are two kinds of savings that your lender would assess, namely, “genuine savings” and “non-genuine savings.”

Before applying for your loan, you must know what genuine and non-genuine savings mean and their differences.

We’ll help you understand the above concepts. Or, if you feel like it’s better to hop on a call, we’re gladly available for that. 

Comprehending Genuine Savings

Genuine savings refers to the amount of money you have gradually saved up over time by yourself, which you continue to save and grow.

Genuine savings prove to a lender that you are responsible for your budget and finances, and it assures them that you are likely to be a low-risk borrower.  

It is advised that you demonstrate you can budget and have a habit of saving to prove your repaying ability. Examples of genuine savings include ;

• Savings accumulated over the last three months or more.

• Term deposits are held for three months or more.

• Equity in residential property from previous purchases.

• First Home Super Saver Scheme (FHSS)

• Profit gained from the sale of a property. 

• Cash gifts held for more than three months. 

Demonstrating these genuine savings to your lender will increase your probability of receiving your home loan. Please note that what one lender considers a genuine saving might be considered a non-genuine saving by another. 

Understanding Non-Genuine Savings 

Non-genuine savings refers to money that depends on someone else’s finances or is a one-time occurrence. 

Lenders do not generally accept these since they do not demonstrate good saving habits.

Although non-genuine savings will not help you receive a home loan, they may lower your chances. Non-genuine savings may include ;

• Inheritance 

• Gifts

• Borrowed funds

• Tax refunds

• Bonuses received from work

• First Home Owners Grant

• Profits gained by selling an asset, property, or vehicle 

• Short term savings ( money saved for less than three months)

Is It Possible To Obtain A Loan Without Genuine Savings?

Do not panic if you don’t have genuine savings. You still have hope to receive your home loan. Other options you can rely on if you don’t have genuine savings are:  

For starters, you can speak to a home mortgage broker and ask for suggestions since there are many specialists and non-bank lenders in the market who are ready to provide you with a home loan without genuine savings. 

You can evade the genuine savings requirement by having a guarantor on your loan. 

If you can spare time, you can also leave your non-genuine savings in your savings account for three months or more and demonstrate it as your genuine savings.   

Moreover, if you are a tenant, providing your rental payment history as evidence of your ability to pay your monthly rent on time may be accepted by your lender. 

However, different lenders have different rules and requirements, so check with your lender to determine what is accepted and unaccepted as savings. But what if you’re a Muslim? How will you find a lender? Rest assured, we have many solutions for you at Afiyah Financial Services.