Disclaimer:
The information on this website is for general guidance only and does not constitute financial or investment advice. Always do your own research and seek personalised advice from a qualified financial adviser or mortgage adviser before making financial decisions. All investments carry risk and past performance is not indicative of future results.
Key Takeaways
- Deposits can start as low as 5% depending on the product.
- First Home Loan and shared ownership schemes can help.
- New builds may allow 10% deposits under LVR exemptions.
- Lower deposits can mean higher interest and insurance costs.
- KiwiSaver withdrawals can boost your deposit if eligible.
There's a misconception that having at least a 20% deposit is the only option for a First Home Buyer. Whereas, the amount of deposit needed to buy a house in New Zealand can be from as low as 5% ... enabling First Home Buyers to pursue their dream of owning a property by using low deposit home loans.
TIP: Boost Your Deposit
To help you achieve a home deposit, check out the KiwiSaver First-Home Withdrawal. If you have been a member of KiwiSaver for at least 3 years, you may be able to make a withdrawal from your savings to put towards a deposit for buying your first home. Read our guide on 5 tips to boost your KiwiSaver for strategies to maximise your balance.
What Are the Deposit Options for a First Home Buyer?
5% Deposit
Having saved a 5% deposit, you may be eligible for the following financial support products available to First Home Buyers:
First Home Loan
First Home Loans are issued by select banks, building societies and credit unions, and underwritten by Kāinga Ora. They are designed to assist first home buyers who may be able to service a mortgage, but not have the savings up front to provide a full deposit.
Key points:
- Allows for 5% deposit
- Income criteria - Have a before tax income from the last 12 months of:
- $95,000 or less for an individual buyer without dependents; or
- $150,000 or less for an individual buyer with one or more dependents; or
- $150,000 or less (combined) for two or more buyers, regardless of dependents
YouOwn
YouOwn is a co-ownership scheme whereby you buy a portion of the property you can afford now, and YouOwn help with the rest. You pay a charge on YouOwn's portion and after five years, you can buy YouOwn's share when you are able to. You have all the rights of ownership and, subject to compliance with relevant law, you are free to alter and maintain the house as you wish.
Who is Eligible?
- NZ Citizen / Permanent Resident
- Household income of $130,000+
- Less than $15,000 in debt
- 3 years contributing to KiwiSaver
- 5% deposit from savings and/or KiwiSaver
Need personalised guidance?
Chat with a First Home Buyers Club affiliated mortgage adviser - no obligation!
10% Deposit
Achieving a 10% home deposit opens up the possibility of purchasing a New Build home. This is because New Build homes are exempt from Loan-to-Value (LVR) ratio restrictions the Reserve Bank places on banks. The bank will consider deposits as low as 10%, but borrowers would still need to meet the affordability and serviceability criteria to qualify.
Advantages of 10% Deposit (New Build):
- Lower upfront costs: You'll need less cash upfront, so you don't have to save as much to keep up with the market, getting you into your first home quicker.
- More flexibility: You may be able to buy a property sooner than if you were saving up for a 20% deposit.
- Lower maintenance: Because your new home is a New Build, there will be less initial maintenance.
- More time to save: Depending on when the finishing date for the development is, you may have more time to save.
Disadvantages of 10% Deposit:
- Higher costs in the long term: Your monthly mortgage repayments will be higher, and you may also be required to pay lenders mortgage insurance (LMI).
- Higher interest rates: Lenders may charge higher interest rates on low deposit loans.
- Less equity in the property: You'll have less negotiating power if you need to sell the property in the future.
Overall, a 10% deposit for a New Build home can be a good option if you're keen to get onto the property ladder sooner rather than later. However, it's important to weigh up the advantages and disadvantages and consider whether it's the best option for your financial situation.
20% Plus Deposit
20% plus is the ideal home deposit, but in reality this is a big ask for First Home Buyers in today's market. However, a deposit of at least 20% of the property's purchase price is typically required to avoid paying low deposit costs.
Advantages of 20% Deposit:
- Lower monthly repayments: When you put down a 20% deposit, you are borrowing less money, which means your monthly mortgage repayments will be lower.
- No low deposit costs: For some banks this is an upfront fee based on the size of the loan. For others, it is a margin added on top of the interest rate offered. Generally, this can range from 0.25% to 1.5%.
- Lower interest rates: Many lenders offer lower interest rates to borrowers who have a larger deposit.
- Easier to arrange finance: We would normally suggest a 10 working days finance clause in your Sale & Purchase agreement if clients have a pre-approval, and 15 days if they don't.
- Greater equity in the property: You will own a larger portion of the property and will be in a stronger financial position if the property increases in value over time.
Overall, a 20% deposit can provide significant financial benefits when purchasing a home. It can help reduce your ongoing costs, improve your negotiating position, and increase your equity in the property.
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