Buying your first home is exciting, but can also be stressful. For instance, saving a 20 per cent deposit for a house could take several years for most couples. While you might be able to borrow with a lower deposit with some lenders, you’ll be required to pay for Lenders Mortgage Insurance, which could add thousands of dollars to your total costs.
Additionally, a lender may want to determine how you saved your deposit to assess your financial situation and repayment capacity. That’s why some lenders ask you to have at least a part of your deposit in genuine savings – which refers to the money saved by you over time from your own income. Any part of your savings acquired as a windfall (including an inheritance, gift, bonus or even your tax refund) is not likely to pass the genuine savings test.
However, what qualifies as genuine savings may also differ between lenders. For example, some lenders may count deposits from sources other than your own income towards genuine savings as long as they remain deposited in your account for three months without being accessed.