Genuine and Non-Genuine Savings in a Home Loan Application
What is the difference between genuine and non-genuine savings in a home loan application?
When applying for a home loan, lenders will often look at the source of your savings to determine your ability to repay the loan. Two common types of savings are genuine savings and non-genuine savings. Understanding the difference between the two is important when applying for a home loan.
Genuine Savings: Genuine savings are funds that have been consistently saved over time, typically for at least three to six months. Examples of genuine savings include funds from your paychecks, regular savings deposits, and inheritance. Genuine savings demonstrate to lenders that you have a strong savings habit and are committed to repaying your home loan.
Non-Genuine Savings: Non-genuine savings are funds that have not been consistently saved over time and may have been accumulated through other means. Examples of non-genuine savings include gifts, bonuses, and the sale of assets. Non-genuine savings can be a concern to lenders as they may not reflect your ability to consistently save and repay the loan.
Benefits of Genuine Savings: Demonstrating genuine savings to lenders can help increase your chances of getting a home loan. Lenders will see that you have a history of consistently saving, which can indicate that you are financially responsible and have the ability to repay the loan. Additionally, using genuine savings as a down payment can help you avoid the need for mortgage insurance and secure a lower interest rate.
Benefits of Non-Genuine Savings: If you have non-genuine savings, it may be possible to use them as a down payment on your home loan. However, lenders will typically require additional documentation to verify the source of the funds and may limit the amount that can be used as a down payment.
In conclusion, the difference between genuine and non-genuine savings is important to understand when applying for a home loan. Genuine savings demonstrate to lenders that you have a strong savings habit, while non-genuine savings may require additional documentation and may not reflect your ability to consistently save and repay the loan
Speak to a mortgage broker today about refinancing to set yourself up to pay off your home faster and avoid paying unnecessary interest.