14 October 2013
14 October 2013,
 0

In my last blog How much can I borrow, I talked about the need for a deposit as this is often the big thing keeping you from buying your new home.

One of the big things Lenders (ie Banks, Credit Unions etc) look for is some evidence that you have the ‘commitment’ to take out a loan. What I mean by that is that you have some demonstrated willingness to repay a loan.

Yes of course it is important for them to look at your income and how much you earn etc, but they also want to know that you will repay the loan, not that just that you can. Does that make and sense?

Let me first demonstrate my point with an example. Say, you already have a loan and you want to change lenders to get a better interest rate. The new lender will always ask you to show them your home loan statements so that they can see you are repaying your existing loan and have not missed any repayments. A reasonable request I would have thought.

You need – Genuine Savings:

So how do they do this if you do not own a home? Lenders refer to it as Genuine Savings. Generally the definition of genuine savings is money you have had in a bank account for a period of 6 months.  Preferably they want to see that you have added to this account with regular deposits but it could also be a term deposit, where the balance does not change.

Each Lender has a slightly different policy on what they call Genuine Savings, but generally, they want you to have 3% of the purchase price (at the time of application) held in an account in your name as Genuine Savings.

As I talked about earlier in How much can I borrow, the maximum loan you can get is 95% of the purchase price. There for you need to contribute more than 3%. This extra money can be made up of a number of different sources such as;

  1. A gift from mum & dad or family
  2. Bonus from work
  3. A tax cheque
  4. Lotto wins etc.

You can see here the main thing they want is an element of you saving & proving your commitment to the cause. The other bit they do not mind so much. But if 100% of the deposit came from this source then they may not be as happy about lending you some money.

Open a designated savings account

The last tip here is around the actual savings account – make sure you have a designated savings account for the sole purpose of saving for the home deposit. There are a few reasons for this but a primary reason is that when it comes to applying for the loan you only need to get statements on one account & it is clean & simple.

If there are 2 of you buying the house together open a joint savings account (ie in both names) and then both make contribute to this account. It doesn’t matter if your contributions are different, but it is important that you are both contributing and working together on the same goal.

Please take some time in selecting the account you are going to use so you maximise the interest you are getting, have a look around for the best deal. I have listed a couple of the main options below with their rates as at (14/10/13). You can see they have a couple of options on how they reward you.

  • Some reward new accounts,
  • Some reward you for having a regular savings plan (i.e. an amount each month).

Make sure the one you chose is able to provide you with bank statements as this is the key to getting a loan approved….  

Introductory Rate

Introductory period

Revert rate

Min deposit required to keep bonus interest

RAMS Saver Account

4.51%

N/A

3.21%

$200

Rabo Direct High Interest Saver

4.51%

4 months

3.25%

ING Direct Savings Maximiser

4.50%

4 months

2.75%

Citibank Online Saver

4.40%

4 months

2.95%

UBank

4.31%

N/A

3.61%

$200

Bankwest Telenet Saver

4.30%

6 months

2.70%

St George Maxi saver

4.25%

5 months

2.35%

Westpac eSaver

4.11%

3 Months

2.50%

ANZ Bonus saver

4.06%

N/A

0.01%

$10

Commonwealth Bank NetBank Saver

4.05%

3 months

2.50%

St.George  Incentive Saver

4.00%

N/A

0.50%

1 deposit each month

nab iSaver

4.00%

4 months

2.50%

ANZ Online Saver

2.50%

N/A

2.50%

 

Cheers

David Johnson – The Home Loan Guy

You can connect with me on Linked in – www.linkedin.com/davidvjohnson

‘Like’ my Facebook page – www.facebook.com/noblefinancialservices

Or, follow me on Twitter – @davevjohnson

 

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