The difference between genuine and non-genuine savings
1184469841
When applying for a home loan you’ll be 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. This might seem a bit nosey at first, it’s one of the ways some lenders consider whether you’ll be able to cope with the financial commitment of a home loan.
Your hard-earned savings will be classified as either ‘genuine’ or ‘non-genuine’ savings. What's the difference between them and what does it mean for you? Find out below.
What are genuine savings?
Put simply, genuine savings is money you have saved up over time. Lenders want to see that you are capable of building savings, as this can demonstrate your ability to manage money – and might indicate you’ll be a good borrower.
So, for example, if you’ve diligently put away $250 each month over two years, you’ll have $6,000 (plus any interest) towards a deposit. This will be classed as genuine savings as you’ve accumulated them over time.
Sometimes just showing that you can save regularly (for even just three months) is enough to demonstrate genuine savings. Likewise, stocks and shares can often be considered genuine savings if they have been held for at least six months.
What are non-genuine savings?
Non-genuine savings is money that you’ve recently acquired that hasn’t been saved by yourself or been in your possession for at least three months. This could be through an inheritance, a gift, funds from selling a large asset, or if the bank of mum and dad are funding your deposit.
Non-genuine savings can include: Gifts and inheritance, Equity in an existing property, Tax refunds, Bonuses, Sale of an asset, Sale of shares
Tip: Non-genuine savings aren’t ‘non-genuine’ forever. If the non-genuine savings are held in your account for at least three months, then they could be classified as genuine savings.
What can I do with non-genuine savings?
How much savings do you need to buy a house?
How much genuine savings do I need for a home loan?
Want to find out where you stand? Calculate your Borrowing Power.
Need some help with your first home loan?
Whether you’re confused the purchase process, wondering what LMI or LVR mean, or are looking for help along the way, our resources are here to make sense of all that finance jargon.
You are protected by responsible lending laws. Because of these protections, the recommendations given to you about home loans are not regulated financial advice. This means that duties and requirements imposed on people who give financial advice do not apply to these recommendations. This includes a duty to comply with a code of conduct and a requirement to be licensed.
All loan applications are subject to the lender completing responsible lending checks and considering the borrower’s individual circumstances. Terms, conditions, fees and charges apply. Information provided is factual information only and is not intended to imply any recommendation about any financial product(s) or constitute tax advice. If you require financial or tax advice you should consult a licensed financial or tax adviser.
© Pepper New Zealand Limited NZBN 9429031065153 | NZ Company Number 3416551
