Yellow Brick Road: Home

What You Need to Know About Saving for a Deposit

In this article:

You’re saving for a deposit. Here’s why factors like your borrowing power, government rebates and the banking royal commission might affect your plans.

There’s more to saving for a home loan deposit than giving up smashed avocado and takeaway coffee. Of course, setting a budget and cutting down on unnecessary expenses is an essential way to save, but several other factors can either help or hinder your success. 

Know your borrowing capacity 

Figuring out how much a lender will let you borrow is the first step in becoming serious about saving for a deposit. Having a goal to work towards gives direction to your savings plan because now you know how much to put away each week and over what timeframe. Lenders want to see that you’re able to save a significant amount of money over time – it’s called ‘genuine savings’ and it works in your favour when applying for a loan.

Use a mortgage calculator for a rough idea of your borrowing capacity. Depending on the calculator, you may have to supply your income details, financial commitments, number of dependants or living expenses.

For a more accurate guide to your borrowing capacity, talk to your Yellow Brick Road mortgage broker. We’re familiar with a wide range of loan options and lending criteria, so we know how different lenders are likely to assess your repayment ability. Together we can get a clearer idea of how much deposit you need based on a realistic calculation of your borrowing capacity.

What government schemes can mean for you

Government schemes may help you reach your deposit saving goal sooner.

The First Home Super Saver scheme allows you to save a home deposit within your super fund if you’re a first home buyer. You're able to make voluntary super contributions, within existing contribution caps, and then withdraw them to use for your deposit. Lump sum and salary sacrifice contributions will be taxed at just 15%, rather your usual marginal income tax rate. The contribution limits apply per person, so you can get twice the benefit if both you and your partner have the capacity to contribute.

Another government scheme you may be eligible for is the First Home Owner Grant. The grant usually applies to new homes only, but each state and territory has its eligibility criteria. You may also be eligible for a stamp duty exemption or concession. Contact the Office of State Revenue to find out what is available in your state. 

Take the first step

Why living expenses matter

Banks are now taking a much closer look at living expenses before agreeing to lend money. The royal commission has brought about a greater emphasis on responsible lending, which means that applicants must demonstrate their financial ability to sustain long-term loan repayments.

Rather than relying on Household Expenditure Measure tables to account for an applicant’s living expenses, banks are increasingly requesting applicants to declare their living expenses. You may now be asked to break down your spending into specific categories such as groceries; medical; utilities; transport; insurance; childcare; education; entertainment. You may even be asked to supply your everyday bank account statements as evidence of your salary and daily expenditure.

When saving for a home loan deposit, it pays to plan for this scrutiny of living expenses. It’s a useful exercise to prepare yourself for what you’re getting into as a homeowner and how you can trim your spending. If your discretionary spending – such as eating out, subscriptions or holidays – is excessive, reign it in now and divert these extra savings towards your deposit.

**The information on this article contains general information and does not take into account your personal objectives, financial situation or needs. If you require further information don’t hesitate to contact the branch directly. 

Feature articles

Steps towards equality for women mortgage brokers This year’s International women’s day theme of ‘Each for Equal’ focuses on what each of us could do at the individual level to make a difference. In line with this thought, we spoke with women Branch heads at YBR to understand what made them thrive professionally.

6 Money Mistakes You Don't Want to Make Spend big in the lead up to Christmas then pay for it in the New Year. It’s an all too common habit that many of us fall into. See these solutions.

Pay Off Debt in The Lead Up to Xmas Take aim at debt now before the expenses of Xmas start mounting up. Here’s how to clean up your finances, including dealing with your credit card.

Principal and interest vs interest-only? How to choose between an interest-only and standard home loan? See if you fit into any of these common scenarios.

Should You Invest in A Holiday Home? Holiday homes – is investing in a beach shack or bush retreat a good move?

View all articles


Enquire now