Do you need a 20% deposit to buy a house in New Zealand?
One of the most common questions I hear from people hoping to buy their first home is, “How much deposit do I actually need?”
You may have heard that you need a 20% deposit before a bank will consider lending you money. While a 20% deposit is a common benchmark, it isn't necessarily the only way to get into your own home. The deposit you need depends on several factors, including the property you're buying, your financial circumstances, the type of lending available and the bank's lending criteria.
What does a 20% deposit look like?
Let's say you're looking at buying a home for $700,000.
A 20% deposit would be $140,000.
A 10% deposit would be $70,000.
A 5% deposit would be $35,000.
The smaller your deposit, the more you'll need to borrow. A lower-deposit application may also face additional lending requirements, different interest rates or other costs. Banks operate within Reserve Bank lending restrictions, but those restrictions don't mean every borrower who meets a particular deposit threshold will automatically qualify. Banks still assess each application individually.
Can you buy a house with less than a 20% deposit?
Potentially, yes. Some buyers may be eligible for a low-deposit home loan, depending on the lender's criteria and the circumstances of the application. There may also be specific lending options for eligible first-home buyers. The important thing is to understand which options are actually available to you rather than assuming you must save for years longer before exploring your choices.
Can you use KiwiSaver as your house deposit?
If you're eligible, you may be able to withdraw your KiwiSaver savings to help buy your first home. You must have been a KiwiSaver member for at least three years, intend to live in the property and leave at least $1,000 in your account. There are specific rules for previous homeowners, so check your eligibility.
Gifted funds from family may also be acceptable to a lender, although the bank may require documentation confirming the source and whether the money needs to be repaid.
Remember though... Having enough money for a deposit doesn't automatically mean you'll qualify for a mortgage. The bank also needs to be comfortable that you can afford the repayments after taking your regular living expenses and other commitments into account. You'll also want to allow for buying costs and avoid leaving yourself without any savings for unexpected expenses once you've moved in.
Don't assume you can't buy simply because you don't have a 20% deposit. Equally, don't assume that having a deposit means you're ready to borrow. Understanding both your deposit position and your borrowing capacity is the best place to start.
If you're considering buying a home anywhere in New Zealand, I can help you understand your options, what lenders may look for and what steps could put you in a stronger position.