What buyers need to know about saving
The ability to save money plays an important role in obtaining finance. Typically, when buyers are in the market for property, they have saved up for a deposit. However, it’s important to remember that lenders categorise different types of savings when assessing the borrowing criteria of a potential home-buyer.
A lender considers this type of savings as money that has been genuinely saved over time. This shows that the potential homebuyer is able to make consistent payments and is likely to do so with the mortgage repayments.
Generally, the lender will require that the savings are held in a bank account or invested (but can easily be cashed), in the name of the borrower and that the funds are shown on a bank statement.
Non genuine savings
This type of savings is usually a lump sum of money. It can be a gift from someone, inheritance, a pay-advance from an employer or funds from the sale of a car or other asset. Non-genuine savings loans are designed for people who may not have enough equity or money for a deposit.
While some lenders may require a minimum deposit of five to ten percent in genuine savings, others take into account the applicant’s rental history as proof that they are able to commit to ongoing payments. This can be used, by some lenders as an alternative to providing genuine savings.
Each person’s situation is different and every lender has their own criteria and requirements. This is why it’s important to have a mortgage broker to help guide through the loan options which are most suitable for the customer’s deposit.