non genuine savings policy - fact sheet

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Fact Sheet: Non-Genuine Savings (Rental) Policy

What is it?

We all know how hard it is to save for your deposit for your first home, especially while you are also paying rent. With the rental policy you can apply for a loan without having genuine savings. Usually a bank will require you to have a minimum of 5% genuine savings, the intent of this policy is to;

1. Ensure you have a financially vested interest in the property being purchased 2. Assist with demonstrating your character and ability to make a commitment 3. Assist in demonstrating your capacity and willingness to repay the loan.

Your historical rental payments are now an acceptable form of genuine savings where you are currently renting, however you still need to provide adequate funds to complete the loan, but these funds can come from a variety of sources rather than savings.

How does it work?

You must be able to demonstrate:

1. A minimum of 12 months satisfactory continuous rental history to borrow 95% of the purchase price.

2. The property leased is managed through a Licensed Property Manager / Agent (excludes family / private)

3. Evidence of sound repayments behaviour by showing rental payments made without any late or partial payments for this period

4. Consideration of rent payments is only to apply for tenants who are currently renting and are the borrowers of the home loan.

Key points:

1. 12 months of rental history, irrespective of the amount, will satisfy the requirement for genuine savings, this rental amount does not need to equate to 5% of the loan amount. The bank only uses the rental history to provide evidence that you can make regular payments.

2. Given the rental history meets the above policy, you only need to find a minimum of 5% of the loan amount to make up the funds to complete – this can come from any source.

What if I don’t have 12 months of rental history?

In situations where there is less than 12 months rental history you will need to have at least of three months rental history as described above, however this will affect the maximum amount you are allowed to borrow against your purchase property based on the funds source. If your rental history is only for a period >3 months and < 12 months, you can use the following deposit types;

• Bonus / Dividend / Commission payment – limited to 95% LVR (Loan to Value Ratio) • Inheritance – limited to 90% LVR • Non-real estate asset sale i.e. Motor vehicles – limited to 90% LVR • Sale of Shares • Tax Refunds – limited to 95% LVR • Gifts – limited to 95% LVR • Borrowings – limited to 90% (needs to be included in servicing calculation)


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What evidence will I need?

In order to take advantage of this rental policy, you will need to be able to supply a letter from the Licensed Property Manager/Agent detailing the following:

• Full name of tenant/s as per tenancy agreement • Address of the tenanted property • Commencement date of tenancy (minimum 3 months term to apply) • The amount of rent paid per cycle (e.g. weekly, fortnightly, monthly • Confirmation of 3 months satisfactory rental payment history • With an attached copy of your tenancy ledger

Example Customer wishes to purchase a property for $500,000, they require $25,000 (5%) as funds to complete the sale. They have been renting for 12 months, at $300pw ($15,600 per year). The customer’s parents have offered $25,000 as a gift to assist with the purchase. How does this work? Non Genuine Savings Conditions Satisfied by rental? Yes

How? The 12 months of rental history satisfies the conditions for genuine savings. The amount of the rental is not relevant; the lender is simply assessing your behaviour that they can make regular contractual payments.

Funds to Complete: As the Non Genuine Savings conditions are satisfied by the 12 months rent, funds to complete the loan can come from any source. In this case the customer received 25k as a gift from a parent to assist with the purchase, this is acceptable to use

Example 2 Customer purchasing property $575,000 - 5% equates to $28,750. Customer has only rented for 5 months. They have $20,000 in genuine savings and have just received a bonus last week of $15,000. Non Genuine Savings Conditions Satisfied by rental? No, but we can still fund this loan Why? The 5 months of rental history are not enough to satisfy the conditions for genuine savings. Funds to Complete: As the Non Genuine Savings are not passed by rental, the funds to complete the loan need to come from source of genuine savings as defined by the bank. The customer requires $28,750 to satisfy policy and complete the loan, this can come from:

• $20,000 of savings • As they have been renting for up to 3 months they are able to use the bonus to make up the

$8,750 While this product may not be suitable for everyone, it does provide significant benefits to those seeking to purchase a property with little or no deposit, where their rental history can assist them into their new home. If you are not sure whether you satisfy the rental policy and if it is right for you, call us and discuss it with us first. At Loan Wize, we understand that there is no one size fits all home loan, and that everybody’s needs are as unique and as individual as they are. We listen to you and tailor our recommended solutions to your individual circumstances. So if you think the Non-Genuine Savings (Rental) policy may be right for you, call and discuss your situation with a Loan Wize Professional Lending Specialist today!

non genuine savings policy - fact sheet

Economy & Finance