If you’re saving for a home deposit, you may have come across the term “genuine savings” and wondered exactly what it means – and whether your savings qualify. It’s one of the more commonly misunderstood parts of the home loan application process, and getting it wrong can delay your approval or catch you off guard when you’re ready to buy. Here’s what you need to know.
What Are Genuine Savings?
Genuine savings refer to funds that have been accumulated by the borrower over time through their own efforts. Lenders use this as a measure of your financial discipline — evidence that you can consistently set money aside and manage your finances responsibly. It’s not just about having a deposit; it’s about how you got there.
Most lenders require genuine savings when a borrower has a deposit of less than 20% of the purchase price (i.e. when the loan-to-value ratio, or LVR, exceeds 80%). In these situations, Lenders Mortgage Insurance (LMI) is also typically required, and lenders want reassurance that you have the habits to service a loan over the long term.
What Counts as Genuine Savings?
While policies vary between lenders, the following are generally accepted as genuine savings:
- Savings held in a bank account for at least three months – this is the most straightforward form. Most lenders look favourably on regular contributions to a savings account that demonstrate a consistent pattern of saving over time.
- Term deposits – funds held in a term deposit for three months or more typically qualify.
- Shares or managed funds – investments held for at least three months can count at their current market value.
- Equity in an existing property – if you already own property, most lenders will generally accept the equity you hold as genuine savings.
- Rental history – some lenders, though not all, will accept a consistent record of on-time rental payments as evidence of savings behaviour. This can be particularly helpful for renters who find it harder to accumulate cash savings while paying rent.
- The First Home Super Saver (FHSS) Scheme – If you have been making voluntary contributions into your superannuation to save for your first home, these funds can generally be used to satisfy lender requirements. Because the FHSS scheme requires money to be contributed and held within your super fund over time, most Australian lenders look very favourably on it and will accept the released amounts as genuine savings. This makes it an incredibly tax-effective way to build a qualifying deposit.
What Doesn’t Count as Genuine Savings?
This is where many borrowers are caught out. The following are generally not accepted as genuine savings, or are treated with much more scrutiny:
- Cash gifts from family – a gifted deposit from a parent or relative is one of the most common scenarios. While many lenders will accept gifts as part of a deposit, they typically will not count them as genuine savings unless the funds have been sitting in your account for at least three months and you can demonstrate additional savings of your own.
- First Home Owner Grants (FHOG) – most lenders do not consider government grants as genuine savings. They can still form part of your overall deposit, but they won’t satisfy the genuine savings requirement on their own.
- Tax refunds – a lump sum tax refund is not evidence of a savings habit. Most lenders will not count it as genuine savings, regardless of the amount.
- Inheritances – like gifts, a sudden lump sum received as an inheritance will not typically be classified as genuine savings. Most lenders require you to have held the funds for a qualifying period before they will accept them.
- Proceeds from the sale of an asset – depositing the proceeds from selling a car or other asset does not typically meet the genuine savings criteria. As with inheritances and gifts, holding those funds for the required period can change that.
- Borrowed funds – money from a personal loan or credit card advance will not qualify as genuine savings. It can also negatively affect your borrowing capacity, so it is worth avoiding this approach altogether.
How Much Genuine Savings Do You Need?
Most lenders require genuine savings of at least 5% of the purchase price. So for a $750,000 property, you would need to demonstrate at least $37,500 in genuine savings. Your total deposit may be larger – made up of genuine savings plus gifts, grants or other funds – but that 5% genuine savings component is typically the minimum threshold.
Some lenders have more flexible policies and may waive the genuine savings requirement altogether in certain circumstances, such as when the LVR is below 80%, or when the borrower has a strong rental history. This is where lender selection becomes particularly important, and where working with a broker rather than going direct can make a real difference.
Tips for Building Genuine Savings
If you’re not quite there yet, the good news is that time is your friend. Here are a few practical ways to build a qualifying savings history:
- Set up a dedicated savings account and make regular transfers immediately after each pay. Even modest, consistent contributions demonstrate good habits to a lender.
- Start as early as possible. The three-month minimum is just that – a minimum. A longer, consistent savings history will work in your favour with lenders.
- Avoid dipping into your savings. Withdrawals from your savings account can raise questions. If you need access to funds, keep a separate everyday account.
- Document everything. Keep records of any large deposits and be ready to explain them to your lender.
- Check whether your rental payments qualify. Been renting and paying on time? Speak to a broker about whether your rental history can support your application.
Why This Matters More Than You Might Think
Genuine savings aren’t just a box-ticking exercise. The lender requirements around them exist because research consistently shows that borrowers who have demonstrated disciplined saving behaviour are less likely to default on their loans. From the lender’s perspective, it’s a proxy for financial responsibility.
For you as a borrower, it means that how you save matters just as much as how much you save. A large deposit that appeared in your account last month will raise more questions than a smaller deposit that has been growing steadily for the past year.
Ready to Talk Through Your Situation?
Genuine savings rules can be complex, and policies differ significantly from one lender to the next. What doesn’t qualify with one lender may be perfectly acceptable with another – and knowing which lenders to approach for your specific situation is exactly the kind of guidance a broker provides.
At Ingram Financial, we take the time to understand your full financial picture before recommending a lender. Whether you’re still saving, ready to apply, or not sure where you stand, we can give you a clear, honest assessment of where you’re at and what your next steps should be.
Get in touch with us today – there’s no obligation, and we’ll get back to you within one business day.
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