There’s a few numbers being thrown around when it comes to working out how much cash savings you will need in order to secure your first or next home.

While the 20% deposit is the general rule of thumb for most lenders, Graeme Salt, managing partner at Chan & Naylor Finance, shares that it comes down to each borrower’s circumstances and where they are in their wealth-building timeline.

“If you’re a first-time buyer and you’ve only got a 5% deposit, that’s okay. The banks understand that. If you’re in your early 20s, it’s [also] okay,” shares Salt, as he sits down with editor Sarah Megginson to discuss how lenders will respond when assessing your borrowing capacity and ability to service a loan.

“If you’re in your mid-50s and you’ve only got 5%, then the banks will really start to be concerned.”

If you can show evidence of being able to budget and put aside capital in the lead up to the application stage, then it will act as an indication of how you will behave financially when you are tied to a loan, he adds

“What you tend to find is that the banks look at the whole picture of a borrower and they say, ‘Is this someone who when times are tough, will keep paying their home loan repayments?’” Salt explains.

On some occasions a borrower’s savings will be injected with a cash gift from a relative who wants to help them towards securing home ownership. But how do lenders treat this situation?

Salt shares that firstly, the lender will want to have full disclosure on exactly who gifted the cash and the specific details surrounding it. But regardless, he adds that they will still generally want to be shown “a three months savings pattern”.

“What they tend to like is someone who is sensible with their savings pattern – not spending money left, right and centre – does not have too many credit inquiries, is stable with their job, and over 30 years will make that loan repayment,” Salt says.

To learn more about how to best approach a lender with your deposit, as well as what matters most – a bigger deposit or a higher salary – watch Graeme Salt’s full interview above.