Unlocking Homeownership: The Essentials of 5% Genuine Savings

Steve Keramidas

Steve Keramidas, Mortgage Broker Mortgage Compare Plus

Unlocking Homeownership: The Essentials of 5% Genuine Savings
04 Mar 2024

Are you on the path to homeownership but finding the world of home loans and deposits a bit perplexing? You're not alone. Navigating the nuances of 5% genuine savings can feel like decoding a secret language. But fret not! We're here to demystify this crucial aspect of securing your dream home loan.

Understanding Genuine Savings

Genuine savings are the funds you've diligently saved over time. They serve as proof to lenders that you're financially responsible and capable of managing mortgage repayments. But it's not just about stashing cash under the mattress. Genuine savings can include savings accounts, term deposits, shares, or even equity in existing properties.

Deciphering the 5% Deposit

You've probably heard about the infamous 5% deposit requirement. Most lenders will ask for a deposit equivalent to 5% of the property's purchase price. For example, if you're eyeing a home priced at $500,000, you'd need to come up with $25,000. However, this figure can vary depending on the lender's policies and other factors like government incentives.

Qualifying as Genuine Savings

What counts as genuine savings? It's not just about having money sitting in your account. Lenders want to see evidence of consistent saving over time, typically around three to six months. Regular deposits into your savings account demonstrate financial responsibility and stability.

Exceptions and Alternatives

Life doesn't always go according to plan, and you might not meet the 5% genuine savings requirement. But fear not! There are alternatives, such as family guarantees or government schemes, designed to assist first-time buyers. These options can provide a much-needed helping hand when it comes to meeting the deposit hurdle.

Top Tips for Building Genuine Savings

  1. Start Early: The sooner you start saving, the better.
  2. Budget Wisely: Keep track of your expenses and look for areas where you can cut back.
  3. Automate Savings: Set up automatic transfers to your savings account to ensure consistent contributions.
  4. Reduce Debt: Pay down outstanding debts to free up more funds for savings.
  5. Seek Expert Advice: Consider consulting with a trusted mortgage broker for personalised guidance and support.

Understanding 5% genuine savings is key to achieving your homeownership goals. With the right knowledge and guidance, you can navigate the complexities of home loans and deposits with confidence. So keep saving, stay focused, and get ready to open the door to your dream home!