- In First things first - Steps before applying for finance, Getting ahead - How to improve your finances
If so, then you will need what is referred to as “genuine savings”
Many of you may be unfamiliar with this term, and I would like to help explain this necessary attribute to you.
For any property that you wish to purchase, and in all cases where you are wishing to borrow more than 90% of the purchase price, for most lenders, you will be required to demonstrate that you have held a minimum of 5% of the purchase price, in your account for a minimum of three months. This is what is referred to as “genuine savings” and it helps make the bank and the mortgage insurance companies comfortable that you have a good savings habit.
Unless you are a first home buyer, purchasing or constructing a brand new home, then you will also be required to have enough money to pay for your “stamp duty” – which is a government charge payable to the office of state revenue.
Your stamp duty does not need to be held in your account for three months, you just need to ensure that you have this money set aside for your purchase.
Back to the 5% genuine savings – if you are purchasing a property for $400,000, then you must have had $20,000 in your account for at least three months. The bank will also want to see that you have been regularly adding to these savings from your salary or wages. That is unless you have held these funds in a term deposit for many months.
If you have come into a lump sum or gift from relatives, and the funds have not been saved up over time and held in your account for at least three months, there are options available to you, to purchase your property at 90% or even 95%. The catch here is that you may pay a slightly higher interest rate, than the great offers you currently see advertised.
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