How much deposit do you need for a first-time home buyer in NZ?

You may find yourself asking:

• Do I have enough of a deposit?
• How much can I afford to borrow?
• How do I start the process?

This is where working with a mortgage adviser proves really beneficial. We’ll meet with you at the very start of your journey and guide you through the process all the way to settlement and beyond.

But first, let’s discuss a good starting point: what a first home loan deposit may look like.

First Home Loan Deposits

The standard owner occupied home loan deposit requirement is 20% of the properties purchase price. However, there are some options to reduce the deposit size and make it a bit more achievable.

Buying with less than 20% deposit:

Most lenders will accept home loan applications with a minimum of 10% deposit subject to lender policy and affordability criteria. As there is higher risk on a lender in this scenario, they will take some additional steps to mitigate this risk. This can look like:

• Higher benchmarks to meet the lenders affordability criteria.
• Higher interest rates compared to if you had 20% deposit.
• An additional fee added to your interest rate.
• Your financial position may be taken into further consideration. For example if you have a large amount of short-term debt, the lender may less likely to accept your application.

Important note: Lenders typically have limited funding for these applications and can change their rules around this lending at any time.

BNZ is an exception who will assess applications with as little as 5% deposit. You must meet their policy and affordability criteria, and you’ll be subject to standard interest rates + a ‘lenders equity premium’ (LEP) fee which is a percentage added to your interest rate.

Kāinga Ora First Home Loan Scheme

Some lenders partner with Kāinga Ora to help more people into their first homes using a minimum 5% deposit. Once again, your lending application is subject to additional policy set by both the lender and Kāinga Ora to mitigate the higher risk. You would also be subject to a ‘lenders mortgage insurance (LMI) fee which is lump sum 1-1.2% of the loan size added to your home loan for the life of the loan.

Kāinga Ora participating lenders:

• ASB
• Kiwibank
• NBS
• NZHL
• SBS
• The Co-Operative Bank
• Unity
• Westpac

To learn more about the Kāinga Ora First Home Loan Scheme and see if you meet the eligibility criteria, have a look here.

We hope that gave you some insight into what your home loan deposit may look like. For more information on buying your first home, have a read of our First Home Buyers Guide.

If you’d like to learn more about your lending options, feel free to book a free no-obligation call with one of our mortgage advisers. You can also subscribe to our monthly newsletters where we provide information on the latest housing market updates.

Looking forward to hearing from you soon.

Fiona & Amy

NZ Mortgage Advice