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Saving a home loan deposit can be challenging enough. Then, lenders often will put another hurdle in your way by asking for proof of ‘genuine savings’. Here’s all you need to know about clearing that obstacle.

Lenders use the term ‘genuine savings’ to describe any funds you’ve saved over a period of time.

Basically, it’s their way of confirming that you’re in this for the long haul – that you’re committed to being financially responsible with your money.

For example, if you’ve received a gift from your parents to help cover the cost of your home deposit, some lenders may still want you to verify that you’re putting an allocated amount of money aside in a savings account on a regular basis.

What many home buyers don’t realise though is that there are several different ways you can verify that your savings are genuine.

Here are some types of savings lenders may consider genuine savings

– Regular deposits into a savings account over 6 months
– Term deposit savings accounts held for at least 3 months
– Shares or managed funds held for at least 3 months
– Rental history for the past 6 months
– Salary sacrificing through the First Home Super Saver scheme
– Additional repayments into a car loan or personal loan
– Deposit paid to a real estate agent, builder or developer that was originally in your savings account prior to being paid (i.e. not borrowed from somewhere else)

Keep in mind that different lenders will have different policies around what they will and won’t accept as genuine savings.

As an example, showing some banks your rental payment history may not be enough without also showing them savings account bank statements that prove you’re depositing money regularly.

What doesn’t count as genuine savings?

Having plenty of cash sitting in your savings account often isn’t enough for some lenders. They may still want to see you’re able to save money over a period of time as well.

Here are some examples of funds that won’t count as genuine savings with the banks:

– Gift from parents or family
– First Home Owner’s Grant (FHOG)
– Borrowed funds (for example money taken from a personal loan)
– Selling assets (for example selling a car or furniture to raise cash)
– Tax refund
– Inheritance

A few final pointers

Keep in mind that some banks may consider using the FHOG towards your overall deposit amount in some circumstances.

Likewise, there are situations where a gift from a family member could be large enough to avoid the need to prove genuine savings at all.

The key to improving your chances of getting your home loan approved is to structure your genuine savings history so that it appeals to the right lender.

If you’d like help setting this up, speak to us to today about the best ways to verify your savings. That way you’ll have a much better chance of getting your mortgage application approved.

Every year thousands of Aussie families flush their hard earned dollars down the gurgler because they put off the simple act of refinancing their mortgage. If you’re overdue, rest assured that it’s much easier than you may think!

While there are no hard rules about refinancing, it makes financial sense to review the loan when your individual circumstances change.

For example, you may be growing your family, moving to a new location, or getting married.

There are also plenty of reasons that exist outside personal circumstances, including the major financial benefits it can offer, and we’ll run through some of these below.

Refinance to get a better rate

Refinancing does not always have to mean changing banks.

There are hundreds of circumstances in which borrowers refinance their loans to get a better rate from their bank.

The mortgage market is very competitive, and a deal signed two years ago may not be in your best interest today.

However, if your bank is not in a position to offer you a better rate, there are many lenders in the market who can get you a better deal.

Lock in a great rate

You may have seen the news recently that the RBA kept the official cash rate on hold at 0.25%.

However it won’t stay that low forever!

 

Consolidate debt

Refinancing helps to reduce the interest payable on the different loans you have, which can include credit card, car loans or personal loans.

It basically involves combining all the loans into a new mortgage, giving you one simple repayment to make each month instead of a bunch of them – which can lead to late fees if you forget one.

The best news? All your debts are charged at the home loan interest rate – which is usually much lower than a credit card rate!

Increase your investment

If you are looking at your investment options but are financially constrained, it’s time to consider refinancing your mortgage.

One reason to do so is to buy another property.

Refinancing in this circumstance makes a lot of sense because you could have enough equity in your property, which may enable you to make another house purchase.

Get in touch

If you’re feeling like it’s probably time you should refinance your home loan, but are simply too busy to do so, then we’ve got great news for you: our job is to make it super quick and easy!

In fact, we can help make the whole process so stress free you’ll be kicking yourself for not doing it earlier.

So if you can identify with any of the above reasons to refinance you home loan, feel free to get in touch with us today!

‘Adulting’ is a real thing. It has even made it to the Oxford dictionary where it’s defined as “behaving in a way characteristic of a responsible adult, especially the accomplishment of mundane but necessary tasks”.

So today we’re kicking off a series of articles on adulting from a financial perspective.

Starting from your first decade of adulthood, we will step you through what you should be focussing on financially at each life stage.

Think of it as a financial road map that will steer you towards your ideal retirement.

Your 20s and early 30s

When you’re in your 20s and early 30s, retirement can seem a long way off.

However, with a little bit of forward planning when you’re young, you can set yourself up to really enjoy your ‘golden years’.

Here are 5 steps to help you get the ball rolling when you’re in your 20s and early 30s.

Checkpoint 1: Set goals and create a budget

Planning for your financial future starts with setting short, medium and long term goals. And yep, that includes thinking about retirement.

When do you want to retire? How much money will you need when you get there? What kind of lifestyle do you want when you retire?

It might seem like you’re getting ahead of yourself, but think about it this way: you can’t kick a goal if you don’t know where the goalposts are.

Once you have your goals figured out, create a budget that documents all of your spending each month.

ASIC has a handy budget planner that can get you started. We can also help you put a more comprehensive one together.

Checkpoint 2: Build healthy spending habits

Now that you’ve got a budget, it’s important to respect it.

Don’t spend more than you’ve budgeted for in each category, such as food, entertainment or (gulp) alcohol.

Every time you do, you’re shooting your future self in the foot.

Remember though, this isn’t about cutting out all the fun – it’s about finding a balance between enjoying yourself now, and really enjoying yourself later. So make sure your budget includes treats for the here and now.

When it comes to debt, try to never keep a negative balance on your credit card. These cards carry insanely high-interest rates, and you’ll be accomplishing nothing more than giving your hard-earned money to the credit card company.

Checkpoint 3: Start investing now, not later

By investing even a little bit of money now, you give compound interest a longer time to work its magic.

The best way to illustrate this is by looking at an example featuring two brothers we’ll call Lewis and Clark.

Lewis decides to start saving early, and invests $2,000 a year for 10 years, then does nothing at all for the next 20.

Clark, on the other hand, procrastinates for 10 years, then invests $2,000 each year for the next 20 years. Both brothers earn a clean 7% interest each year.

Who do you think ends up with more money after their 30 years are up?

Well, Clark did pretty well. He put a total of $40,000 of his own money in and ended up with $81,991 at the end of it all.

Lewis on the other hand, only put $20,000 of his own money in, but after the same timeframe he ended up with $106,930 – over $20,000 more than his brother Clark!

That’s the power of compound interest.

The moral of the story is: start investing now, even if you can only afford a little bit, and you’ll thank yourself later.

Checkpoint 4: Learn the basics of investing

It’s ok to start investing by putting your money into a savings account, but before long you’re going to want to move your money into an investment vehicle that works harder for you.

Take some time to research the different types of investments that exist in the market, and give some thought to which ones might be best for your needs.

Do you want to start a property portfolio? Perhaps a few steady performers on the ASX 100 have caught your eye? Or maybe you like the look of ETFs?

Whatever you choose, make sure you do your research beforehand. And then start putting your savings towards it!

If you need a starting point on where to conduct your research, get in touch and we’ll point you in the right direction.

Checkpoint 5: Choose your own superannuation fund

When it comes to your superannuation, it pays to never settle for the default option. You want to choose an option that best reflects you and your risk profile.

As such, here are some quick tips to help you choose a super fund.

– Identify your risk level: Are you a ‘slow and steady wins the race’ kind of person? Or are you willing to accept a little more risk for the potential of higher returns?

– Create a shortlist: Narrow the field to make the task less overwhelming. Super comparison websites can help you refine your list, but you should never make your decision on a website rating alone.

– Look at the long-term performance: Try and pick out a fund that has performed consistently well over 5-10 years, not a fund that had a bumper year in 2018.

– Compare fees and costs: ASIC has written this report to help you avoid the sting of hidden fees and costs.

– Any additional benefits or services? Before you decide to make the move to a particular super fund it’s worth calling the fund directly to see what other services or benefits they offer.

Final word

Saving for retirement can seem daunting, especially in your 20s and 30s, but it doesn’t have to be.

Start by taking baby steps: set a goal and budget, spend wisely, and save whatever you can afford each month. Before long you’ll start to see progress.

And of course, educate yourself! Be sure to check out our next article on this series on adulting, which shifts the focus to your mid-30s and 40s.

If you have any questions in the meantime, don’t hesitate to get in touch. We’d love to help out.