What is Genuine Savings?
Genuine Savings refer to funds that you have saved over time, demonstrating your ability to manage finances and save for a home loan deposit. These savings should be held in your account for a minimum period, typically three to six months, to be considered genuine by lenders.
Types of Genuine Savings
Genuine Savings encompass a variety of sources, reflecting your ability to accumulate funds over time and demonstrating financial responsibility. These include:
- Personal Savings: Funds accumulated through regular contributions to a savings account, term deposit, or cash savings. This represents a disciplined approach to saving and showcases your commitment to building financial security.
- Equity: Equity refers to the value of assets you own, such as property, shares, or vehicles. When these assets are sold, the proceeds can contribute to your Genuine Savings. Lenders consider equity as a reliable source of funds, especially if the assets have been owned for a significant duration, indicating stability and financial maturity.
- Inheritance: Inherited funds, received through bequests or estates, can be considered Genuine Savings, provided they are properly documented and verified. While inheritance is not within your direct control, it reflects a windfall that can bolster your savings and strengthen your financial position.
- Bonus Payments: Lump sum payments received as employment bonuses, tax refunds, or gifts can contribute to your Genuine Savings. These additional funds, deposited into your account for the required duration, offer a valuable opportunity to accelerate your savings goals and enhance your financial profile.
- Regular Deposits: Consistent contributions from your regular income sources, such as employment wages, rental income, or dividends, demonstrate a stable cash flow and financial discipline. By consistently allocating a portion of your income to savings, you reinforce your ability to manage finances responsibly and accumulate Genuine Savings over time.
Impact of Genuine Savings on Your Home Loan Application
Genuine Savings play a pivotal role in the home loan application process, influencing lenders’ assessment of your creditworthiness and financial stability. Lenders typically require a minimum percentage of Genuine Savings as part of your deposit, with the exact amount varying based on factors such as loan size, property type, and lender policies.
Having Genuine Savings enhances your credibility as a borrower and strengthens your chances of loan approval. Lenders view applicants with substantial Genuine Savings more favourably, as it demonstrates a capacity to manage finances responsibly and mitigate risks associated with mortgage lending.
Conversely, a lack of Genuine Savings may pose challenges during the loan application process. Without sufficient savings, you may face difficulties meeting lenders’ deposit requirements or securing favourable loan terms. In such cases, you may encounter higher interest rates, fees, or loan restrictions, impacting the overall affordability of your home loan.
Tips for Building Genuine Savings
Building Genuine Savings requires discipline, commitment, and strategic financial planning. Here are some actionable tips to help you accumulate Genuine Savings effectively:
- Establish a Budget: Create a comprehensive budget outlining your income, expenses, and savings goals. Identify areas where you can reduce discretionary spending and redirect funds towards savings to accelerate your progress.
- Set Realistic Goals: Define achievable savings targets based on your financial situation and timeline. Break down larger goals into smaller milestones to track your progress and maintain motivation.
- Automate Savings: Take advantage of automated savings tools to streamline your saving process. Set up regular transfers from your income account to your savings account on payday to ensure consistent contributions without the temptation to spend impulsively.
- Reduce Debt: Prioritize debt reduction to free up more funds for savings. Focus on paying down high-interest debts, such as credit cards or personal loans, and consider consolidating multiple debts into a single, lower-rate loan to accelerate your debt repayment and boost your savings capacity.
By implementing these strategies and prioritizing Genuine Savings, you can strengthen your financial position, enhance your borrowing capacity, and move closer to achieving your homeownership goals. At Loanfi Finance and Mortgage, we’re dedicated to helping you navigate the complexities of the home loan process and secure the best financing solutions tailored to your needs. Contact us today to learn more about how we can support you on your journey to homeownership.