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 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 November 22nd, 2017
$
Loan purpose
Offset account
Loan type
Your filter criteria do not match any product
Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
3.84%
3.84%
$0
$0 p.a.
110%
Requires a family member to act as guarantor. Discounted rate available with family pledge loans. Family pledge loans require no LMI and no deposit. NSW, Qld and ACT only.
3.65%
3.66%
$0
$0 p.a.
90%
Enjoy a low variable rate with no ongoing fees and borrow up to 90% of the value of the property.
3.98%
5.13%
$600
$8 monthly ($96 p.a.)
95%
A fixed rate home loan with additional repayment options. 350K NAB Rewards Points offer available. Terms and conditions apply.
4.75%
5.05%
$0
$299 p.a.
95%
A fully featured home loan with an offset account and discounts available.
4.04%
5.05%
$600
$8 monthly ($96 p.a.)
95%
Fix in a competitive rate for three years. 350K NAB Rewards Points offer available. Terms and conditions apply.
4.03%
5.04%
$600
$10 monthly ($120 p.a.)
95%
Get a 2-year fixed rate with flexible repayment options to help you save.
3.85%
4.95%
$0
$395 p.a.
95%
A discounted package rate for owner occupiers with the ability to package a Qantas rewards earning Amplify credit card. $1,500 cashback available for refinancers. Conditions apply.
3.99%
4.99%
$0
$395 p.a.
95%
A package home loan with fee free extra repayments available during the fixed term.
3.79%
5.26%
$600
$0 p.a.
95%
Short term fixed rate home loan with no ongoing fees with an interest only repayment option.
4.19%
4.83%
$0
$395 p.a.
95%
You can save on a host of Westpac products by packaging your 5-year fixed rate home loan.
5.55%
5.74%
$990
$10 monthly ($120 p.a.)
95%
Enjoy a competitive interest rate, make fee free extra repayments and a redraw facility.
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.
4.62%
4.67%
$500
$0 p.a.
95%
Ideal for first home owners or anyone who wants a no-frills, basic variable rate home loan.
3.78%
3.79%
$0
$0 p.a.
95%
A no frills loan with a competitive rate and a maximum LVR of 95%.
5.24%
5.38%
$600
$8 monthly ($96 p.a.)
95%
The Westpac Rocket Repay Home Loan lets borrowers to own their home sooner with a 100% offset to save on interest.
4.70%
5.09%
$0
$395 p.a.
95%
A package home loan with discounted interest rate.

Compare up to 4 providers

NAB Choice Package Home Loan - 2 Year Fixed (Owner Occupier P&I)

A fixed rate package with flexible repayment options. 350K NAB Rewards Points offer available. Terms and conditions apply.

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

Discount off an already competitive interest rate for loans over $150k. NSW, QLD and ACT residents only.

IMB Budget Home Loan - LVR <=90% (Owner Occupier, P&I)

Get a competitive rate without features you may not use.

HSBC Home Value Loan - Resident Owner Occupier only, P&I

Enjoy a low variable rate with no ongoing fees and borrow up to 90% of the value of the property.

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, read the PDS or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms and Conditions and Privacy Policy.
Ask a question