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Genuine Savings – Your Guide to Deposits for Islamic Loans in Australian
Genuine savings represent funds accumulated over time, demonstrating financial discipline to halal finance providers offering Islamic loans in Australia. Sharia compliant lenders require genuine savings to assess borrower reliability and ensure responsible lending practices align with Islamic finance principles.
What Qualifies as Genuine Savings in Islamic Finance?
Funds saved consistently over at least three months, proving financial management capability.
Islamic lenders consider the following as acceptable genuine savings:
- Savings held or accumulated in your account for at least three months: This is the most common and preferred method.
- Equity from an existing property: If you own another property, the equity released from it can count.
- Dividend or bonus held for three months: Income from investments or employment bonuses, when held for the required period, can qualify.
- Historical rental payments: Some specilised Islamic finance providers will consider a strong history of consistent rental payments as evidence of genuine saving capability.
These criteria demonstrate your ability to save and manage finances under a Sharia loan agreement.
What is Typically not Accepted as Genuine Savings?
One off lump sum deposits are excluded from savings calculations by halal finance providers.
Government grants: Examples include the FHOG (First Home Owner Grant). These are designed as additional support, not as evidence of your saving discipline.
- Proposed savings or rental purchase plans: Future savings or theoretical payment plans do not qualify as present savings.
- Savings not held in your account: Funds not visible or traceable in your own financial accounts are generally not accepted.
- Windfall proceeds: Large, unexpected sums of money, such as lottery winnings, while valuable, typically do not demonstrate consistent saving behaviour.
Lenders supporting halal finance in Australia want to see consistent behaviour over time, not one-off financial events.
Why Do Islamic Finance Providers Require Genuine Savings?
Islamic Finance providers view savings as a clear sign of a good, disciplined borrower.
Banks and providers of Islamic loans require genuine savings primarily as an indicator of your ability to manage money responsibly. Financiers want to see that you have personally planned and saved for an Islamic loan deposit yourself. This shows a commitment to your financial goals and signals that you are not solely reliant on external sources for your initial equity. Ultimately, it reduces the perceived risk for the financial institution.
How Much Genuine Savings Do You Need for Islamic Loans in Australia?
Islamic finance providers require a minimum 5% of the property's purchase price as savings.
Standard requirements typically demand 5% of the property value as genuine savings, with remaining deposit amounts sourced from other acceptable means. For example, purchasing a $800,000 property requires $40,000 in genuine savings, while additional deposit components can originate from various sources.
Higher savings percentages may strengthen applications and provide access to better terms with sharia compliant lenders offering competitive halal finance solutions.
Is a Deposit Paid to a Developer Considered Genuine Savings?
Yes, if it meets specific lender requirements.
A deposit for a home paid directly to a developer, builder or real estate agent can be deemed genuine savings, provided it meets specific criteria:
- The deposit has been held by the Developer, Builder or Real Estate Agent for more than three months.
- Crucially, the deposit was not borrowed, and you can clearly prove it resided in your savings account prior to you making the payment.
This scenario is common for off-the-plan properties where you may have paid a deposit well over a year ago. Speak to one of our experts to discuss your specific situation.
Can You Get Islamic Loans in Australia Without Genuine Savings?
Yes, specialised halal finance providers offer home finance without traditional savings requirements.
- The Home Guarantee Scheme (HGS) is an Australian government initiative that supports eligible homebuyers to buy a property with a deposit of as little as 2%-5%. Housing Australia guarantees the rest to avoid needing to pay for LMI.
- Lenders that waive the genuine savings requirement with a striong rental history,
- Guarantor loans where family members secure the loan,
- Bank of Mum and Dad, a loan or gift from parents or family can go towards a deposit for your home.
Although the deposit can come from non-traditional sources, halal finance providers still assess your asset position and financial stability before approval.
Summary: Understanding Genuine Savings for Your Islamic Loan
- Genuine savings is defined as money you’ve saved over time, typically for three months, demonstrating your ability to manage money.
- Accepted sources for genuine savings include consistent savings, equity from existing property, held dividends or bonuses, and historical rental payments.
- Unaccepted sources typically include government grants like FHOG, proposed savings, or windfall proceeds.
- Lenders require genuine savings as a sign of you being a reliable borrower and for your financial stability.
- A minimum of 5% of the property value is generally required as genuine savings, with the rest of your Islamic loan deposit coming from other sources.
- A deposit for an off the plan purchase can sometimes counted as genuine savings if held for over three months and not borrowed.
- It’s possible to get a home loan with no genuine savings through specific lenders or by utilising a guarantor loan, gift from parents or qualifing for the Home Guarantee Scheme.
Start Your Halal Finance Journey Today!
If you’re planning to apply for an Islamic loan in Australia and unsure whether your funds qualify as genuine savings, we can help. At Crestmount Money, we specialise in halal finance options. Whether you’re a first home buyer or looking ro upgrade your existing property, our expert team can guide you through the process.