The difference between genuine and
non-genuine savings

couple differentiating genuine from non-genuine savings

 Estimated read time: 3 Minutes

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

What are genuine savings?

The definition can vary from lender to lender, however, 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

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.  
Are gifts and lump sums considered non-genuine or genuine

Are gifts and lump sums considered non-genuine or genuine?

Funds that have been gifted to you are usually considered as non-genuine savings. However, if you leave these untouched in a savings account for at least three months, then these could be considered genuine savings by some lenders. 
What can I do with non-genuine savings

What can I do with non-genuine savings?

If your savings are non-genuine then you may still be able to use those funds towards your deposit – however this does vary lender to lender. At Pepper Money, we accept 100% gifted deposits on some of our home loan options, meaning you can use non-genuine savings for your full deposit.
How much savings do you need to buy a house

How much savings do I need to buy a house?

At Pepper Money, we consider 100% gifted deposits on some of our home loan options - our borrowing power calculator can help you work out how much you might be able to borrow.

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

Every lender is different. We don’t require genuine savings for some of our home loan options. 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 discipline and will aide lenders in their assessment of your home loan application.

   

Contributor | Barry Saoud, General Manager, Mortgages and Commercial Lending

Barry joined Pepper Money in July 2021 as General Manager, Mortgages and Commercial Lending. He is responsible for the strategic direction and operating performance across product, credit, and settlements for mortgages, commercial loans, personal loans, and direct sales. Read more.

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