Genuine savings is such an important aspect of a property purchase, especially for the first home buyer market. So why do so many applications get rejected because they don’t meet the bank’s genuine savings policy?
It’s simple – lack of education! If you’ve already found your dream home, not meeting genuine savings can be a mistake that can cost you several months, or worse – the property itself.
It’s no secret that banks are getting stricter and genuine savings is often one of the areas with very little flexibility and very little left to interpretation. Lump sum payments, gifted funds, tax returns, inconsistent history and cash deposit are just some of the reasons a bank may not accept your savings as genuine.
Cash deposits – more often than not the bank will not accept a cash deposit as genuine savings unless it was deposited over three months ago, as they have no way to confirm where it came from.
Gifted funds – don’t wait until you have found a property to get the gift. Some lenders will consider gifts as genuine savings if you’ve held it in your savings account for over three months.
Additional account holders – If there is a name linked to the savings account other than the applicants, it can be difficult to prove to the bank which savings are yours, and what savings belong to the additional account holders that are not part of the loan.
Lump sum payments – lump sum payments and large deposits often raise questions with most lenders – especially where it is outside of your normal savings pattern. For example, if you’re putting away $500 once or twice a week, this would be a typical savings pattern – but then suddenly there is a $5,000 deposit – the bank will seek to understand where this came from and if it meets their genuine savings policy.
You get paid monthly – I would urge caution against transferring all your savings in one payment. Yes, you could likely prove to the bank that the deposit came directly from your income, and therefor is genuine savings – but to do this, you’re likely going to have to provide the bank with your transactional bank statement in order to show the flow of the funds from your pay, to your transaction account, to your savings account. This seems simple in theory – but now the bank is picking apart every single transaction in your transactional bank account, and it’s always that one transactional from 3 months ago that isn’t even relevant to your current circumstances that causes issues.
Ensure the best chance for your savings – There are a few simple tips you can follow to ensure your savings have the best chance to meet genuine savings policy.
- always transfer the funds from your own transactional bank account to your savings
- don’t deposit cash funds at your local branch in to your savings account
- If you are receiving a gift, make sure you can hold this for three months prior to your finance application
- Make sure the savings account is only in the applicants names and no other names attached to the account
- keep transfers to your savings account consistent, and try to keep them under $1,000 per transfer if possible
Too late you say? You’ve already done the damage and put the large sum into your account, have multiple cash deposits or have recently received a gift!
Fortunately, we can often help to fix these mistakes and with a little time can repair your savings history – but sometimes it can be more challenging than others. It’s far better to take a pro-active approach to ensure your savings are genuine to begin with – keep it consistent, keep it low, avoid lump sums and you should be fine – Good luck!
Regards, Daniel Reid – Director Emanate Finance
