How much of a deposit do I really need?
The market is seeing more and more first home buyers coming into play, so I figured it was time to answer the question that most of you will be confronted with early on: how much of a deposit do I really need to buy a home in New Zealand in 2025?
The truth is that yes, the traditional benchmark has been 20%, but there are ways to enter the market with as little as 5%. So, can you qualify for help with your deposit? And just because you can, should you do it?
First, let’s take a look at the difference between using a 20% deposit and a 5% deposit.
STANDARD 20% DEPOSIT
Most banks and lenders require a 20% deposit, which means, that for a $600,000 home, you’ll need $120,000 saved.
5% DEPOSIT
Through the NZ government’s First Home Loan initiative, you may be eligible to secure a mortgage with just 5% in the bank. For that same property, you’d be looking at $30,000 saved.
The First Home Loan scheme was created through Kāinga Ora to help along first home buyers who can service a mortgage but are struggling to save for a large deposit.
Here’s the deal:
You have to be a New Zealand citizen, permanent resident or resident visa holder who usually lives in New Zealand
You must earn $95,000 or less if you’re buying a home solo, without dependants
You must earn $150,000 or less if you have dependants, or if you’re teaming up with another person to buy
You need to have a minimum of 5% of the property’s purchase price (including savings, KiwiSaver first home withdrawals, gifts, etc)
You need to be purchasing the home to live in as your primary residence and the property needs to be less than 1 hectare in size
You shouldn’t own any other property or land (excluding ownership of Māori land)
Kāinga Ora underwrites these loans, but they’re still issued by banks and lenders, so we’d still have to go through the usual mortgage process!
THINGS TO CONSIDER
Lender’s Mortgage Insurance may come into play to protect the lender in case you default on the loan. It’s usually about 0.5% of the loan amount
Your interest rates may be higher as the lender is taking on an increased risk by accepting a lower deposit
You still have to prove to the bak or lender that you can service the mortgage and that you’re a good candidate for lending (we’re talking income stability, existing debts, credit history - we can look at all that together!)
Wondering if you might be eligible for a lower deposit? Need some guidance through the process or just want to ask some questions about your unique circumstances? I’ve got you! At Clay Mortgages, we’re here to guide you through the entire journey, every step of the way to your first home. Drop me a line and let’s start exploring what options are available to you!
