What are your Deposit Options?
What are your deposit options when it comes to buying your first home? Lots of people may think that if you don’t have enough savings, you won’t have a big enough deposit for your home loan. This isn’t quite true!
A home loan deposit can be made up of different funds aside from your savings. Although demonstrating effective savings is highly recommended in the eyes of lenders, a deposit may be from a couple different sources such as your Kiwisaver or gifted from a family member.
There are several things to consider when you’re thinking of buying a house – what size deposit you’ll need, how you’ll save for your deposit, and how you’ll afford your ongoing home loan repayments.
- Personal Savings – Putting away a chunk of your income regularly not only takes you closer to a deposit but also demonstrates to the bank that you have the commitment you’ll need for a home loan.
Good habits to maintain before and during paying a home loan:
o Keep track of your spending.
o Before you buy something, ask yourself ‘Do I really need this?’
o Automate your savings so your money is out of your account before you get a chance to spend it.
What are your deposit options aside from savings?
- Kiwisaver – You may be able to withdraw money from your Kiwisaver to buy your first house – you’ll need to fill out the paperwork with your provider and have the funds pre-approved for withdrawal before offering on a house. If you don’t know what Kiwisaver provider you’re with, you can call Inland Revenue and they’ll be able to tell you.
- Gifted funds – Family members can gift you a sum of money that helps with any shortfall you may have with your deposit funds. The bank will require a gifted letter confirming these funds.
- Guarantees – A family member can provide a guarantee over your loan if you have little or no deposit. This allows them to use their equity without having to provide any money upfront. However, if you fail to make a repayment your guarantor is then liable.
If you’d like some more information about your deposit options, we also have a First Home Buyers Guide to Lending document which provides further guidance on the process as well as some definitions to terms you’ll come across. You can download our guide for free from our website.
If you’d like to get in touch to learn about your lending options, feel free to contact us using our details below or head to our website. 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.
