Most lenders require that you establish that you have genuine savings if you are borrowing more than 80% of the value of a house, or 85% or more in some cases.
In general, you must show that you have at least 5% of the expected purchase price saved. Genuine savings allow the lender to authenticate the borrower’s reputation. Borrowers who commit to saving are significantly more likely to succeed than those who do not.
What determines genuine savings?
- It must be in one of the borrowers' names.
- They must be liquid, which means they must be kept in a bank savings account or similar, or they must be investments that can be sold and converted to cash rapidly, such as publicly traded shares.
- The history of genuine savings must be verifiable by providing a 3-month bank statement.
- Not from a family or friend's present, a windfall gain, an inheritance, or the profits of the sale of a non-investment asset.
To participate in or bid at an auction, prospective buyers must first register with the vendor’s agent and be assigned a bidder number. The auctioneer is in charge of the bidding process. They accept bids from prospective buyers and monitor the current offer price.
Before an auction, the seller will set a reserve price, which is normally not published. If bidding exceeds the reserve price, the property is sold upon the drop of the hammer. If your bid is successful, you must sign the contract of sale and pay the deposit right away (usually around 10 percent of the purchase price).
If you bid at an auction, you must be prepared to exchange contracts and execute the transaction. Otherwise, you will forfeit your deposit and may be held accountable for the vendor’s damages.
What if a borrower lacks genuine savings?
Most lenders do not demand genuine savings if you are borrowing 80% or less, while a few lenders do not verify savings for 85, 90, and occasionally 95% home loans.
The higher the loan-to-value ratio (up to 95%), the more likely you will have to pay a higher interest rate, and the stronger your application must be in other areas such as income and employment history.
Did you know that by merely waiting three months, you can convert any deposit into genuine savings?
Simple steps can be taken to convert your contribution into genuine savings, such as depositing the money into a savings account, adding to it each month for three months, and then declaring the money to be genuine savings.
FAQs
Got questions? Find answers to some of the most commonly asked questions about our financial solutions, processes, and services to help you make informed decisions.
LMI is a third-party insurance premium payable by you as the borrower, to protect the lender against the potential loss of money if the borrower is unable to repay the home loan. Generally, an application with a Loan-to-Value Ratio (LVR) of 80% or more may result in the borrower having to pay Lender’s Mortgage Insurance.
Extra payment is an excellent feature of a good mortgage deal. Here, your lender lets you make lump-sum additional payments along with your regular monthly payment. Making extra payments allows you to shorten the length of time you are paying your mortgage. Since your balance is being paid off faster, you will also have fewer total payments to make, thus lowering your interest. At Reliiance Financial Solutions, we can help you find the most suitable mortgage deal for you. We have a range of lenders that allow you to make as many extra repayments as you want, whenever you want, without attracting any penalties.
Stamp Duty is a government tax imposed on contracts, with the amount usually calculated as a percentage of the contract value. In layman’s terms, it is the tax charged for your legal documents to be ‘stamped’.
If you are planning to buy a property, it’s crucial to factor your State’s Stamp Duty into your budget.Chances are, based on your circumstances and state of domicile, you might be able to obtain a stamp duty exemption, or concessions (discount) against the purchase of your first home. Stamp duty laws get changed often, so be sure to check your State Government’s website for the most up-to-date information.
Did you know that some lenders would allow you to cash out any extra repayment you made whenever you need the money? You read that right. This useful mortgage feature is called “redraw facility”. You can withdraw any extra repayments or lump sum payments you make over the life of the loan. At Reliiance Financial Solutions, we will explain all mortgage products to you, including those which allow you to the redraw option.
Testimonials
Discover how we’ve helped our clients navigate their financial journeys with personalized solutions. Read their stories of success and empowerment below.
A 5-STAR RATED FINANCIAL SOLUTIONS PROVIDER BY OUR CLIENTS
At Reliiance Financial Solutions, we have been privileged to have worked with hundreds of remarkable individuals and families.
Very few things come close to receiving their genuine appreciation of our services. All we can say in return is – the pleasure was all ours.
It is also our pleasure to share some client testimonials with you. Please click on Video Testimonials to view them all. Use the buttons at the bottom of the screen to navigate through the videos.
