Buying a home can be a stressful process. Whether you’re a first home buyer, a property investor, or looking at a holiday home, non-genuine savings home loans allow you flexibility in obtaining a home loan without the traditional necessity of a strong savings history and a significant upfront deposit. Here we explain the fundamentals of non-genuine savings home loans and what this option means for you, the borrower.
When applying for a home loan, an applicant will be required to inform the lender of their savings history and how they have saved their deposit. This is done to understand an applicant’s ability to complete home loan repayments over the period of the loan. While genuine savings are earned over a period of time and demonstrate a consistent ability to save money, non-genuine savings arise from gifts or lump sums which have not been saved in a genuine manner over time. In addition, a non-genuine savings home loan can be used in a situation where a borrower provides a guarantor as security for the lender.
The minimum deposit required for a non-genuine savings home loan will vary from lender to lender. With certain lenders it is possible to get a non-genuine savings loan up to 100% of the property’s purchase price – meaning no deposit required – if you have a guarantor and can pay off the costs of completion. In addition, your individual situation will be heavily assessed and you will have to meet the remaining eligibility criteria. However, most lenders will require you to prove that you have genuine savings of at least 5% of the property’s price. Bear in mind, with all deposits less than 20%, you will generally be required to pay Lenders Mortgage Insurance. Ultimately, the greater your genuine savings deposit, the better your chances of being successful in applying for a home loan.
While not all these requirements are definitively needed to be successful in obtaining a non-genuine savings home loan, they will improve your chances drastically.
The rates and fees associated with your non-genuine savings home loan depend on the percentage of the purchase price you are borrowing and may be judged on a case-by-case basis.
Making sure you meet all the basic conditions for home loan applications will ensure a smoother process for the borrower and the lender. If you convincingly meet the basic conditions, your non-genuine savings home loan application will be off to a strong start and favoured by the lender.