Understanding the difference between genuine and non-genuine savings

Understanding genuine and non-genuine savings

When applying for a home loan you’re usually asked to provide a lot of different information, including how much money you’ve saved.

These savings will be the deposit that you put towards the purchase of your new home. You may also be asked questions about how you’ve saved your deposit, as this is one of the ways in which lenders consider whether you have the capacity to pay your home loan repayments every month. Generally, there are two types of savings a lender will consider, known as ‘genuine’ savings and ‘non-genuine’ savings. What's the difference between them and what does it mean for you? Find out below:

Genuine savings

Genuine savings means the money that you have saved up gradually over time. So if you’ve diligently put away $250 each month over two years you’ll have $6000 (plus any interest) to include on your home loan application as a deposit. Generally lenders require this deposit money in a separate account saved over three months. By saving a little every month, you can demonstrate that you are able to budget and have shown a habit of saving. Sometimes just showing that you can save regularly for even as little as three months is enough to show genuine savings.

Non-genuine savings

If you haven’t been able to save a little every month, it is still possible to have a deposit from what are called non-genuine savings. These are sums of money that may have been gifted to you or received as a lump sum from a transaction, but have not been genuinely saved over time. For example, you may have inherited $5000 from your aunt, sold your car, or received a first home owner grant and monetary gifts from a family member, are all considered non-genuine savings.
Non-genuine savings can include:

  • Gifts and inheritance
  • Equity in an existing property
  • Tax refunds
  • Bonuses
  • Sale of an asset
  • Sale of shares

Gifts and lump sums: non-genuine or genuine?

Funds and lump sums that have been gifted to you are usually considered to be non-genuine savings. However, if you receive these funds and put them into a savings account where they are left untouched for generally three months minimum, then these funds can actually be considered to be genuine savings by a lender. Keep this in mind if you receive a lump sum.

What can I do with non-genuine savings?

If your savings are considered to be non-genuine you may still be able to use those funds to purchase your new home because other factors may be considered to determine if you are eligible for a home loan.
Every lender has different rules around deposit requirements, so be sure to check with your lender to determine what are accepted as savings. At Pepper Money, we accept 100% gifted deposits on a majority of home loan solutions depending on your individual circumstances and eligibility - to get you started use our borrowing power calculator to see how much you could possibly borrow.

We’re here to help

Want to know more about our home loan options? Talk to one of our Lending Specialists on 137 377, or enquire online. Alternatively speak to an accredited Pepper Money broker, they're there to help. 

You might also ask:

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

Every lender is different. At Pepper Money, we accept 100% gifted deposits, depending on your circumstances. However, other mainstream lenders may want to see a minimum of 5% in genuine savings as part of your home loan deposit. This is to demonstrate your ability to save while meeting your ongoing living expenses. It shows good money discipline and will aide lenders in their asssessment of your application.
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