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Deposit 5% Genuine Savings Home Loan


What are my Options to Cover Costs if I Have a Deposit of 5% in Genuine Savings for a Home Loan?


Have you worked hard and saved up a 5% deposit for a home loan, but you are now finding that you are short of funds for the associated costs of purchase? Stamp duty, legal costs, and loan fees can add up, and saving for these on top of your deposit can take years. But, if you can deposit 5% of genuine savings for a home loan, and want to enter the property market as soon as possible, you can avoid this delay in a number of ways.


Do I qualify for a deposit 5% genuine savings home loan?


Lending criteria for this type of loan will vary from lender to lender, but generally you will need to satisfy the following criteria:


  • Clean credit history. A clean credit history with no defaults is usually required.
  • Employment record. You need a solid employment record, which usually means at least one year in your current position, or two years in the same line of work. If you are self-employed, you will usually need to have two years of financial and tax records.
  • Repayments. You need to demonstrate an ability to make the required repayments for your loan.
  • Genuine savings. Usually you will need at least 5% of the purchase price in genuine savings to be eligible for this type of loan. Genuine savings is where the funds have been kept in a savings account (or term deposit, share portfolio, or other approved forms) for at least three months with no reduction in value.


What are my alternatives for covering extra costs?


It is useful to explore the different options available with a deposit 5% genuine savings home loan. For example, you might decide to use a guarantor, add a credit card feature to your home loan, or take out a larger loan to cover all the purchase costs:


  • Credit card feature. If you have saved enough for a deposit of 5% in genuine savings for your home loan, but do not have enough for the purchase costs and borrowing fees, you can fund these by adding a credit card to your loan. Some lenders are able to provide you with up to 20K (sometimes more) in a linked credit card to help you finance the purchase expenses. This will allow you to bypass the delay in having to save up for these costs.
  • Use a guarantor. You can consider having an immediate family member guarantee your home loan. A parent or sibling with property in Australia might be able to guarantee your loan so that you do not need to provide a deposit. You can divert the savings you do have to cover the purchase costs or for personal use. To be eligible, your family member must have cash or equity in their property that can cover at least 20% of your property’s purchase price.
  • Take out a larger loan. In some cases you can opt for a larger loan. The lender can provide you with an extra lump sum loan at settlement to help you cover the purchase expenses.


Keep in mind that while lenders might have a ‘genuine savings’ rule when it comes to the deposit, this rule does not apply to your purchase costs. You can fund conveyancing fees and stamp duty from non-genuine savings. So, you might be able to sell off an asset, use your tax return, or use a cash gift from family to cover these associated expenses.


How do I apply for a loan?


Contact ABC Mortgages today about applying for a loan. One of our experienced team members will provide you with a free consultation to determine your needs. We can then find the right product for you by utilising our considerable industry contacts and networks.