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Genuine Savings and Home Loan Approval – What You Need to Know
When applying for an Islamic loan in Australia, especially those structured under Ijarah finance, lenders impose strict genuine savings requirements for any Islamic finance arrangement where the Loan-to-Value Ratio (LVR) exceeds 80%. This is because loans above this threshold require Lenders Mortgage Insurance (LMI), and the higher the LVR, the more rigorous the genuine savings policy becomes. Whether you’re applying for a halal home loan or looking to build your property portfolio with sharia compliant financing, understanding genuine savings is critical to securing approval.
Why Are Genuine Savings Policies So Strict for an Islamic Loan?
It’s because Islamic loan financiers need to protect themselves against risk through LMI claims.
Islamic finance providers require at least 5% of the property price to be held as genuine savings. For example, if you’re buying a property for $800,000, you’ll need to show $40,000 in genuine savings. If you only have $30,000 and the rest comes from a gift or loan, many banks will reject your application.
Why? Because loans over 80% LVR are insured by LMI providers. If the lender needs to make a claim due to a default, the insurer will audit the loan approval. If there’s no proof of 5% genuine savings, the insurer may deny the claim.
What Is Considered Genuine Savings?
Money saved regularly in your name, over at least three months.
Not all savings are equal in the eyes of lenders. Here are common types of genuine and non-genuine savings:
Accepted (with conditions):
- Savings held in your name: Must be held for at least 3 months.
- Transferred savings: Accepted if account names match and you show 3-month history.
- Joint account savings: May be accepted if you’re the primary contributor.
- Savings held in a trust, company, or partner’s account: Accepted if your name is on the account or you are a co-borrower.
Common Mistakes That Cause Rejection:
- Savings in a relative’s account: May be seen as gift funds.
- Loan from family or friends: Not considered genuine savings.
- Savings in overseas accounts: Often rejected unless verified.
We can help you secure an Islamic loan up to 90% of the property value even if your situation doesn’t meet standard policies.
How Do Banks Analyse Genuine Savings?
Lenders assess consistency, source of funds, and spending behaviour.
Savings Patterns:
- Regular deposits: Demonstrate discipline.
- Lump sums: Some lenders accept if funds are held for over 3 months.
- Irregular income (commissions, bonuses): Rarely accepted as genuine savings.
- Redraw accounts: Typically, not accepted, even if funds were saved through extra repayments.
Spending Habits:
- Lenders check for large withdrawals, debts, or inconsistencies in your account.
- Unexplained deposits and high expenses can impact approval.
How Can You Improve Your Savings Profile for Loan Approval?
By building consistency, cutting costs, and documenting your savings history
Simple savings tips:
- Create a budget with your partner.
- Avoid impulse spending.
- Plan meals weekly to reduce grocery costs.
- Ask for discounts, even on your mortgage.
- Sell unused items online.
- Repair instead of replace appliances.
- Cancel unused memberships or credit cards.
Consulting with one of our Islamic finance experts can help you optimise your savings strategy and improve your financial position.
Can You Still Get a Islamic Loan Without Genuine Savings?
Yes, but only with the right specialist Islamic finance provider and a strong application.
At Crestmount Money, our expert consultants specialise in assisting borrowers with limited or non-standard savings histories. Whether your savings are in a joint account, held overseas, or consist of lump sums, we may be able to help you access up to 90% LVR finance.
We assess:
- Your full financial profile
- Whether your rental history can be used as a substitute for genuine savings
- Your eligibility under non-conforming or specialist policies
Need help navigating genuine savings policies for an Islamic Loan? Here’s what you should know:
- You must show at least 5% of the purchase price as genuine savings.
- Funds must be held in your name and saved over a 3-month period.
- Redraws, lump sums, and overseas accounts may not qualify.
- Lenders analyse your spending habits, not just your savings.
- We help clients secure up to 90% LVR home loans—even without traditional savings.
Seek Expert Assistance
Our experts have extensive experience in halal finance in Australia. We can tell you if your deposit will be considered genuine savings, whether you can use your rental history, and if you can qualify for an Islamic loan without genuine savings.
Contact Crestmount Money today to assess your situation and start your journey to homeownership.