TL;DR
- Genuine savings are funds that lenders view as evidence of a borrower’s regular, sustainable saving habit.
- Lenders typically require savings to be regularly added; lump‑sum deposits are only accepted if held for 3 + months or meet special criteria.
- Savings can also come from redraws on existing loans, but many lenders still treat them as non‑genuine.
- Proof of genuine savings is crucial for WA homebuyers to secure a mortgage, often affecting loan‑to‑value limits and interest rates.
- Strengthening your savings proof involves budgeting, reducing discretionary spending, and demonstrating consistent deposits.
What Is Genuine Savings?
Genuine savings are funds that a lender can verify as being regularly added to an account, showing a borrower’s ability to save consistently over time. They are usually held in a borrower‑named bank account, term deposit, or other liquid asset for at least three months before the loan application. Lump‑sum deposits are generally not considered genuine unless they have been held for at least three months or meet lender‑specific conditions. Savings derived from redraws on a loan are viewed skeptically; only a few lenders will accept them as genuine. Lenders scrutinise account activity for undisclosed debts, other expenses, or dependents that could affect repayment ability. Demonstrating genuine savings can influence loan approval, the maximum loan amount (often up to 90 % of property value), and the interest rate offered [1,4,6].
Common Forms of Genuine Savings
| Source | Typical Holding Period | Why It Counts |
|---|---|---|
| Regular deposits into a savings account | ≥ 3 months | Shows disciplined habit |
| Term deposits | ≥ 3 months | Locked‑in funds |
| Salary‑sacrifice contributions (First Home Super Saver) | ≥ 3 months | Tax‑efficient, regular |
| Shares or managed funds | ≥ 3 months | Investment growth |
| Equity from an existing property | N/A | Tangible asset |
| Redraws from a loan | Generally not accepted | Often considered non‑genuine |
Why Genuine Savings Matter for WA Homebuyers
In Western Australia, property prices can be high, and lenders need assurance that borrowers can meet both the deposit and ongoing repayment obligations. Genuine savings serve as a proxy for financial stability. A strong savings record can improve the loan‑to‑value (LVR) ratio, potentially allowing a higher borrowing amount and a lower loan‑to‑value ratio, which can reduce or eliminate Lenders’ Mortgage Insurance (LMI) costs. Without sufficient genuine savings, buyers may face higher interest rates, stricter repayment terms, or outright denial of the loan [3,8].
How Lenders Evaluate Genuine Savings
Documentation Requirements
- Bank statements covering the last 3–6 months showing regular deposits.
- Term deposit statements proving the holding period.
- Salary‑sacrifice or super contribution statements for First Home Super Saver.
- Equity statements for existing property.
Lenders often request a minimum of 5 % of the purchase price in genuine savings, though the exact figure can vary by lender and product. Some lenders may accept a 3‑6 month rental history as an alternative proof of financial responsibility, provided the borrower’s name appears on the lease and a copy of the rental ledger is supplied [8].
Redraws and Other Sources
Redraws from an existing mortgage are typically not accepted as genuine savings because they are considered a form of borrowing rather than an accumulation of funds. However, a few lenders may allow them under specific circumstances, such as when the redraw is part of a structured repayment plan that has been in place for at least three months [1,6].
LMI and LVR Implications
Lenders use genuine savings to assess the risk of the loan. A higher LVR (e.g., 95 %) usually triggers LMI. Demonstrating genuine savings can reduce the LVR required for the loan, thereby lowering or eliminating LMI premiums and improving the overall cost of borrowing [3,8].
Building Genuine Savings: Practical Steps
| Action | What It Shows | Example |
|---|---|---|
| Automate regular transfers | Consistent saving habit | $300 automatically moved to savings each payday |
| Create a detailed budget | Discipline and expense control | Monthly income vs. fixed & variable expenses |
| Cut discretionary spending | Maximising disposable income | Replace impulse buys with free activities |
| Plan a weekly menu | Reduces food costs | Stick to a grocery list and meal prep |
| Negotiate loyalty discounts | Lower recurring costs | Negotiate lower phone or bank fees |
| Sell unused items | Generates extra cash | Online marketplace sales of old clothes |
| Repair rather than replace | Saves money for savings | Fixing a leaking tap instead of buying a new one |
These steps not only help you reach the required 5 % deposit but also build a track record that lenders can verify through bank statements and other documentation. Consistency is key—lenders look for a pattern of deposits rather than one-off windfalls [4,7].
Alternatives and Exceptions
Rental History
If you lack sufficient cash savings, a strong rental history (typically 6–12 months of on‑time rent) can serve as a substitute proof of financial responsibility. The borrower’s name must appear on the lease, and a copy of the rental ledger from the landlord or property manager is required for verification [8].
Windfalls and Gifts
Large one‑off deposits such as inheritance or gifts are generally not considered genuine savings unless they have been held for at least three months. Some lenders may accept them if they can be proven to be a permanent addition to the borrower’s savings, but this is rare [1].
Redraws from Existing Loans
As noted, redraws are usually treated as non‑genuine. However, if a redraw has been part of a structured repayment plan for several months and the funds are kept in a separate account, a lender may consider it as part of the borrower’s overall financial picture [1,6].
Impact on Loan Approval and Terms
- Higher LVR: With sufficient genuine savings, borrowers can often secure a higher LVR (e.g., 90 % vs. 80 %) without LMI.
- Lower Interest Rates: A strong savings history signals lower risk, allowing lenders to offer more competitive rates.
- Reduced Fees: Some lenders waive certain fees (e.g., application or settlement fees) for borrowers who demonstrate robust savings.
- Flexibility in Repayment: Lenders may offer more flexible repayment options (e.g., variable rates, offset accounts) to borrowers with proven financial discipline.
In WA, where the real estate market can be volatile, these benefits can translate into significant long‑term savings for homebuyers.
Common Mistakes to Avoid
| Mistake | Why It Matters | How to Fix |
|---|---|---|
| Relying on a single lump‑sum deposit | Lenders view it as non‑genuine unless held for 3 months | Spread deposits over time or keep the lump‑sum in a separate savings account for 3 months |
| Using redraws as proof | Lenders treat them as borrowing, not savings | Use other sources such as regular savings or rental history |
| Neglecting documentation | Incomplete statements can delay approval | Keep a tidy record of all statements and proof of deposits |
| Ignoring LVR requirements | Higher LVR can trigger LMI | Aim for a lower LVR by building genuine savings |
| Failing to update the budget | Uncontrolled spending erodes savings | Review and adjust the budget monthly |
Conclusion
For Western Australian homebuyers, genuine savings are more than a number on a bank statement—they are a critical indicator of financial reliability that lenders use to assess risk and determine loan terms. By building a disciplined savings habit, providing clear documentation, and understanding the nuances of what counts as genuine, buyers can improve their chances of securing favourable mortgage conditions and ultimately achieving homeownership.
References
- Genuine Savings | What Is It And Do I Need It For A Home Loan? — homeloanexperts.com.au — https://www.homeloanexperts.com.au/genuine-savings/
- Genuine savings: how much is enough for a home loan? — savings.com.au — https://www.savings.com.au/home-loans/genuine-savings
- What are Genuine Savings to Buy a Home? | Canstar — canstar.com.au — https://www.canstar.com.au/home-loans/genuine-savings/
- Understanding Genuine Savings for Mortgage Approval: A Comprehensive Guide | Rosh Partners — roshpartners.com.au — https://www.roshpartners.com.au/blog/what-are-genuine-savings-for-a-mortgage
- What are genuine savings? Do I need them to get a mortgage? — ownhome.com — https://ownhome.com/articles/what-are-genuine-savings-do-i-need-them-to-get-a-mortgage
- What Are Genuine Savings And Why Are They Important For Home Loans? — inovayt.com.au — https://www.inovayt.com.au/blog/what-are-genuine-savings/
- Building Genuine Savings: A Key Step for First-Time Homebuyers – KULFIY.COM — kulfiy.com — https://www.kulfiy.com/building-genuine-savings-a-key-step-for-first-time-homebuyers/
- Genuine Savings – What is it and do I need it to buy a home? – Draw Equity — drawequity.com.au — https://www.drawequity.com.au/genuine-savings-what-is-it-and-do-i-need-it-to-buy-a-home/
