Part 2:

What can I use as a deposit?


Man searching for home loan deposit Now that you’ve figured out how much you’re going to need for a home loan deposit, it means you’ve got a savings goal in mind. But do you have to actually save all that money? What if you’re lucky enough to have access to funds from other sources?

< Read the previous article in this series: How much do I need for a deposit?
Jeremy Fisher headshot 2
Believe it or not, there are some outside-the-square options when it comes to saving a home loan deposit. We spoke to top-performing mortgage broker Jeremy Fisher, the director and founder of 1st Street Home Loans in Sydney. Fisher has settled more than $1.5 billion in loans since 2002 and has won multiple awards in his industry. Fisher shared with us some of the ways you can boost your deposit from outside sources. It turns out that while you’re still going to need cash in hand to serve as a deposit, that cash can come from a few different places.

There’s one catch with using any sudden influx of cash as a home loan deposit: the genuine savings rule. Most lenders want to see a pattern of savings to build up your home loan deposit. This shows them that you have good financial discipline. As a general rule, most lenders like to see six months of genuine savings. That doesn’t necessarily mean you have to be contributing regular amounts. But if you find yourself suddenly awash in cash, most lenders will want you to hold it in your account for six months before using it as a home loan deposit. There are some lenders out there who don’t require genuine savings, but six months is a pretty good guideline to follow in most cases.

Can I use my super as a deposit?

The answer to this one is “not exactly”. There’s been plenty of debate about the merits of allowing buyers to dip into their superannuation funds for a home loan deposit. While Fisher tells us that you can’t actually raid your super for a deposit, there is an option that allows you to leverage your super.

The federal government recently announced the First Home Super Saver Scheme, which allows you to salary sacrifice into your superannuation for the purpose of saving a home loan deposit. The funds that go into this account are taxed at a much lower rate than your normal pay, which means you have the potential to save more than if you’d taken the same amount of money and put it into a savings account.

There are a lot of important details to keep in mind with the First Home Super Saver Scheme and we’ll share all of them in part 4.

Can I use a First Home Owners Grant as a deposit?

You can use a First Home Owners Grant to form part of your deposit. This is very useful if you're building or buying a new property as you can add the grant to your deposit. In some states you might even be able to access a grant whether you're buying a new property or an older dwelling. The most important thing when using a grant for your deposit is to be completely certain that you and the property you're purchasing meet the necessary eligibility requirements for your state or territory.

Can I use shares as a deposit?

SharesIf you have a share portfolio, you might wonder about using it for a deposit. You can’t just show a lender your portfolio and have them take it on good faith as a deposit, but you can liquidate your shares and use the cash for a deposit.

One great thing about selling your shares to use the cash for a home loan deposit is it can help you get around the genuine savings rule, Fisher says. As long as you’ve held the shares for at least six months before you sell them, you should be able to use the cash right away.

Can I use my rental history as a deposit?

While you can’t actually use rental history as a deposit, you can use it as proof of genuine savings, according to Fisher.

“As a general rule, a 12-month rental ledger is required to confirm, and the lease must be in the applicant’s name,” he says.

This means if you come into some money that you want to use as a deposit, you can get around the genuine savings requirement by having 12 months of good rental history.

Can I use a gift or inheritance as a deposit?

Hand holding gift

Most lenders will require a 20% deposit to avoid the genuine savings rule. However, a few lenders will accept a 10% deposit without the need to confirm genuine savings...

Suppose your parents gift you the money to use as a home loan deposit. If you should be so lucky, there are a couple of requirements you have to fulfil.

First, your parents will have to sign an affidavit verifying that the money is a gift rather than a loan. If your parents require you to pay the money back, lenders will look at it as a liability when determining your borrowing power.

Second, the amount they lend you will have to meet certain requirements to avoid the genuine savings rule, Fisher says.

“Most lenders will require a 20% deposit to avoid the genuine savings rule. However, a few lenders will accept a 10% deposit without the need to confirm genuine savings,” he says.

The same goes for money from an inheritance. You can use these funds for a deposit, but to get past the genuine savings rule, you’ll need a 10%–20% deposit.

Can I sell something and use the proceeds as a deposit?

If you happen to have some valuables sitting around that you want to sell, you can use the funds for your deposit. Once again, though, Fisher says you’ll need to hold the funds in your account for six months to meet the genuine savings rule.

Can I use a personal loan as a deposit?

So what about just borrowing more money to use as a deposit? Can you go down to the bank, take out a personal loan and then turn around and use it as a deposit to get a home loan? Surprisingly, Fisher says most lenders will let you use a personal loan as a deposit:

“Most lenders will consider this. However, the personal loan funds will need to have been held for over six months, plus the personal loan liability will need to be included as a liability so serviceability needs to be maintained.”

In other words, borrowing money to so you can borrow more money is a double-edged sword. Any amount you borrow for a deposit is going to be counted as a liability when assessing your home loan. Using a personal loan as a deposit could affect the size of the home loan lenders are willing to give you.

Now that we’ve had a look at the different sources for your deposit, let’s get into the nitty-gritty of how to actually save for it.

Continue to part 3

Other parts in this guide

Or you can start comparing home loans now

Rates last updated August 21st, 2018
$
Loan purpose
Offset account
Loan type
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Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
3.74%
3.74%
$0
$0 p.a.
110%
Pay no deposit or LMI and get a discounted rate with this family pledge loan. Requires a family member to act as guarantor. NSW, Qld and ACT only.
3.49%
3.52%
$500
$0 p.a.
95%
This mortgage combines a very sharp interest rate with a 100% offset account and it's available with a 5% deposit.
3.59%
3.99%
$600
$395 p.a.
95%
Get interest rate discounts and waived fees on this package loan with a 100% offset account.
3.87%
3.89%
$600
$0 p.a.
95%
A low deposit mortgage for aspiring home owners. Fees are low and you can make extra repayments.
4.08%
4.09%
$0
$0 p.a.
95%
Special Owner Occupier Rate. Free Offset Account.
4.64%
4.66%
$0
$0 p.a.
95%
New customers can score a discounted rate and access to a redraw facility.
4.48%
4.70%
$595
$0 p.a.
95%
Switch to this loan and get a $1,500 refinance cashback. Discount off the standard variable rate and no application fee.
4.33%
4.34%
$0
$0 p.a.
95%
A special investment rate and an offset account.
3.94%
4.85%
$595
$0 p.a.
95%
Split you home loan for free with one of the lowest fixed home loan rates.
3.75%
4.92%
$0
$395 p.a.
95%
This 2 year fixed ANZ Breakfree Package rate comes with package discount and product bundle. Terms and conditions, package fee and fees, charges & eligibility criteria apply.
3.99%
4.93%
$0
$0 p.a.
95%
A low deposit investor mortgage with a discounted, competitive rate from one of the big 4 banks.
3.99%
4.00%
$0
$0 p.a.
95%
Commonwealth Bank are currently waiving the $600 establishment fee for customers who take out this home loan.
3.98%
4.30%
$0
$299 p.a.
95%
Borrow more than $1 million and enjoy a 100% offset account and rate discount.
3.99%
4.92%
$0
$395 p.a.
95%
Borrow up to 95% LVR (subject to approval) and fix your interest repayments for the next 3 years.
3.99%
4.90%
$0
$395 p.a.
95%
Pay no application fee and fix your interest for 3 years with this ANZ package home loan.
3.89%
4.94%
$0
$395 p.a.
95%
Fix your rate for 2 years and know your repayments giving you ease in budgeting.
3.89%
4.88%
$0
$395 p.a.
95%
Low deposit package loan with a range of discounts. Earn up to 500,000 Velocity Points to spend on flights, hotels and more.
4.19%
4.20%
$0
$0 p.a.
95%
Borrow up to 95% LVR and pay no application fee if your loan is over $150K for a limited time.
3.95%
5.43%
$0
$395 p.a.
95%
Fund your property portfolio with a low deposit package loan from ANZ. Bundle your loan with credit card and bank account for discounts.
3.99%
4.85%
$0
$395 p.a.
95%
Competitive fixed rate package loan. For a limited time you can earn Velocity Points to spend on hotels and flights.
4.24%
4.27%
$0
$0 p.a.
95%
Buy a home with just a 5% deposit and get flexible repayment options and a redraw facility.
3.97%
4.32%
$0
$350 p.a.
95%
4.10%
5.54%
$600
$10 monthly ($120 p.a.)
95%
Borrow up to 95% LVR and enjoy a 100% offset account with a low ongoing fee.
4.19%
5.46%
$0
$395 p.a.
95%
A package investment loan with a competitive, discounted interest rate and 0 application fees.
4.19%
5.37%
$0
$395 p.a.
95%
4.45%
4.85%
$0
$395 p.a.
95%
Pay no application fee with 100% offset account with redraw facility and borrow up to 95% LVR.
4.89%
4.90%
$0
$0 p.a.
95%
Borrow up to 95% LVR and pay no application fee if your loan is over $150K for a limited time.
4.39%
4.77%
$0
$395 p.a.
95%
A package home loan with 100% offset account.

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Home Loan Offers

Important Information*
UBank UHomeLoan Variable Rate - Discount offer for Owner Occupiers, P&I Borrowing over $200,000

Take advantage of a low-fee mortgage with a special interest rate of just 3.59% p.a. and a 3.59% p.a. comparison rate.

loans.com.au Essentials - Variable (Owner Occupier, P&I)

A competitive interest rate home loan with interest only options. Interest rate 3.64% p.a.
comp rate of 3.66% p.a.

Greater Bank Ultimate Home Loan - Discounted 1 Year Fixed LVR ≤90% ($150K+ Owner Occupier)

Loans over $150k get a discount off an already low fixed rate. Available for NSW, QLD and ACT residents only.

Newcastle Permanent Building Society Premium Plus Package Home Loan - New Customer Offer ($150k+ Owner Occupier, P&I) Discount 1

New borrowers or refinancers can get a discounted rate with this package loan. Bonus $1,500 cashback for refinancers.

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