Home loan deposits – they’re the first step to owning your own kingdom. But saving for a home loan deposit used to be a lot simpler – cut out a few luxuries, hammer down on your debts, and go hard with the monthly savings. But now? Those looking for their happily ever after will have to do more than cut down on Gelato Messina.
I’ve written about the cost of a home loan deposit before, and now, this story’s taken another turn.
Just last September, a letter leaked to Fairfax outlined the details of NAB’s stricter lending criteria. Whereas previously a home loan deposit of 10% of the cost of a home was enough to show that you were a responsible adult who had financial discipline, 10% might now not be enough for some suburbs in Sydney. In fact, you could be looking at a deposit of at least 20%. Some suburbs even require 30% but none of them are in NSW.
Included in NAB’s list of 67 Australian postcodes with stricter lending conditions were 34 NSW postcodes, which is more than half of the list.
Here they are, republished from the Sydney Morning Herald:
| NAB’S RESTRICTED POSTCODES — DEPOSIT OF UP TO 20 PER CENT REQUIRED | |
|---|---|
| Postcode | Suburbs |
| 2000 | Sydney CBD |
| 2205 | Arncliffe, Turrella, Wolli Creek |
| 2113 | East Ryde, Macquarie Park, North Ryde |
| 2769 | The Ponds |
| 2209 | Beverly Hills, Narwee |
| 2019 | Banksmeadow, Botany |
| 2199 | Yagoona |
| 2017 | Waterloo, Zetland |
| 2067 | Chatswood, Chatswood West |
| 2211 | Padstow, Padstow Heights |
| 2008 | Chippendale, Darlington |
| 2141 | Berala, Lidcombe, Rockwood |
| 2153 | Balkham Hills, Bella Vista, Winston Hills |
| 2210 | Lugarno, Peakhurst, Peakhurst Heights, Riverwood |
| 2118 | Carlingford |
| 2222 | Penshurst |
| 2166 | Cabramatta, Cabramatta West, Canley Vale/Heights, Lansvale |
| 2767 | Bungarribee, Doonside, Woodcroft |
| 2127 | Newington, Sydney Olympic Park, Wentworth Point |
| 2144 | Auburn |
| 2566 | Varroville, Bow Bowing, Minto, Raby, St Andrews |
| 2140 | Homebush, Homebush West |
| 2194 | Campsie |
| 2037 | Forest Lodge, Glebe |
| 2768 | Glenwood, Parklea, Stanhope Gardens |
| 2142 | Camellia, Clyde, Granville, Holroyd, Rosehill, South Granville |
| 2150 | Harris Park, Parramatta |
| 2220 | Hurstville, Hurstville Grove |
| 2168 | Ashcroft, Busby, Cartwright, Green Valley |
| 2151 | North Rocks, North Parramatta |
| 2146 | Toongabbie, Old Toongabbie |
| 2195 | Lakemba, Wiley Park |
| 2112 | Denistone East, Putney, Ryde |
| 2208 | Kingsgrove |
Of course, this is just one bank out of many lenders – including non-bank lenders – that could approve you for a mortgage. The thing is, NAB is raising their minimum deposit amount to keep in line with the Australia Prudential Regulation Authority (APRA), who’s been cracking down on lending. So if NAB is already taking measures to slow down investment lending, other lenders might too. It’s not a certainty, but it is a possibility, and something to consider when saving for your home loan deposit. It’s in your best interest that your lender is obeying the laws and regulations around lending, so if you think you’ve scored a deal too good to be true, it probably is.
Buying a home in Sydney – delusional or doable?
So the big question now is: is buying a home in Sydney ever going to a possibility for Generation Y?
There’s no skirting around the issue – the Sydney housing market is a tough place at the moment. Sydney house prices have seen a huge amount of growth in the past couple of years, and with the minimum home loan deposit now increasing, it looks like APRA is going to get it’s wish to slow down investment lending.
But if you’re determined to buy a house in Sydney, it’s not impossible. Perhaps you’ve grown up in Sydney and Hyde Park was and still is your playground. Or maybe it’s your adopted hometown, and you want your kids to be able to enjoy everything this beautiful city has to offer. Whatever your reason, know this: your dream is not impossible. There’s just a few new rules you’ll need to play by.
Save more, faster
Want to maximise your savings? These tips are designed to help you strengthen your financial discipline. Be sure to check out this post on saving more for your home loan deposit.
The suburbs aren’t so bad
If you’re a first homebuyer looking to buy a home in Sydney, the metro areas have never been a great place to start. Unless you have a significant amount of savings, it’s time to stop glorifying the proximity of Sonoma to your doorstep, and start to appreciate what the other areas of Sydney have to offer.
Consider what we in the housing industry like to call the ‘middle ring suburbs’. They’re those more affordable suburbs about 10-20kms from the CBD that are decently established. Translation? Easier to buy into, easy to get to the city, less congestion and more amenities for you and your family.
The solution? Go west, or southwest.
Get a guarantor
There’s a huge conundrum amongst young people today – do I travel, or do I buy a house? If you’re part of the group who decided to answer the call of the working holiday visa, you might be staring at your bank balance wondering how on earth you’re supposed to buy a home in the next couple of years.
Family, that’s how. And no, I’m not having a laugh. It’s quite common for parents and extended family to help out their kids by going guarantor on a home loan. They’ll offer up their home as equity just for the 20% deposit so their risk is limited whilst getting you what you need. It’s a great way for parents to help get their kids a home sooner, provided you pay off their percentage of the amount borrowed as soon as you can. You can read my post about guarantors over here.
Finding the right lender for you isn’t an easy task. It’s easy to go with the big bank who offers you a low interest rate, but you need to make sure that your lender is trustworthy, and if they’re a bank, that they’re complying with APRA’s regulations.
If you’re not sure which lender is right for you, a mortgage broker can easily help you fill in any gaps. Be sure to get in touch with your questions – that’s what I’m here for!