Can I get a Home loan with low genuine savings?
Obtaining a Home Loan with Low Genuine Savings
Like many other Australians, you probably have dreams of owning your own home. But, saving up for the minimum 5% deposit required can be challenging, with everyday expenses such as school fees, groceries, and rental payments to contend with. Fortunately, lenders have been relaxing their lending criteria, and it might be possible for you to obtain a home loan with low genuine savings.
What are the lending criteria for home loans with low genuine savings?
The lending criteria for home loans with low genuine savings will vary depending on the institution, but generally, you will need to have a solid credit history and a good employment record to be eligible. Therefore, you may need to prove that you have a consistent history of paying off debts and bills, and that you have been in stable employment for a period of time.
Alternatives to genuine savings
Lenders classify genuine savings as having the minimum 5% deposit lodged in a separate account for three months. When you have low genuine savings, however, you can still raise your deposit through a number of different means. Some lenders are willing to accept funds from different sources to be counted toward your minimum deposit.
- Gifts. A gift of funds from friends or family can be counted toward your deposit.
- Tax refunds. Some lenders will accept tax refunds as part of your deposit.
- Grants. Government grants, such as the First Home Owners Grant, can be used to source your deposit.
- Asset sales. Sales of assets, such as cars or boats, can sometimes be used to source your deposit.
- Inheritance. If you have recently inherited some money, this can be counted toward your deposit.
- Employer payouts. In some instances, lenders will count employer payouts, such as long-service leave, towards your deposit.
- Windfalls. Funds sourced from gambling windfalls can be approved as part of your deposit by some lenders, although it’s obviously not a good idea to gamble in a bid to fund your deposit.
- Personal loans. In some cases, lenders might accept funds sourced from a personal loan as part of your deposit.
Other sources, such as shares, equity in a home, or proceeds from the sale of a home, may also be accepted towards a deposit.
Deposit and borrowing amounts
Once the genuine savings requirement is removed, you might find that buying your own home is far more affordable than you realised.
With government grants such as the First Home Owners Grant, you can buy a $250,000 property with as little as $7,500, or a $400,000 property with just $15,250 deposit.
Additional products and features
A home loan with low genuine savings comes with standard features, such as fixed or variable interest rates, redraw facilities, and offset accounts.
Common restrictions and conditions
While every lender will vary in their criteria, there are some restrictions or conditions that are common to many lenders. These include the following:
- Applicants on probation. Some lenders refuse applicants who are in a probationary period with respect to their employment contract.
- Defaults. Applicants usually need to have a financial history free of debt defaults to be approved.
- Financing a building project. If you are looking to borrow to build your own home, you can find it more difficult to obtain a home loan with low genuine savings.
- Purchase structures. Lenders usually require you to buy as an individual, rather than through an alternative structure such as a company or trust.
What are the costs associated with home loans with no genuine savings?
The good news is that a home loan with low genuine savings will not necessarily be more expensive than other types of home loans.
How to get the application process started
If you are interested in applying for a home loan, and you have low genuine savings, the best way to get started is to give ABC Mortgages a call today. We can help you determine your eligibility for a loan, so you can move as quickly as possible towards fulfilling your dream of owning your own home.