Mortgages with JJMost first home buyers in New Zealand need less than the full standard deposit banks prefer, because there are several recognised ways to buy with a smaller one. The main paths are low-deposit lending from the banks, the Kainga Ora First Home Loan, a KiwiSaver first-home withdrawal, a gifted deposit from family, a family guarantee, and buying a new build, which is treated differently under the Reserve Bank’s Loan to Value Ratio (LVR) rules.
Which of those works for you depends on your income, your savings, the property and the lender. Most buyers end up combining two or three of them.
I’m JJ van der Westhuizen, a Mortgage Adviser based in Orewa, and “how much deposit do I actually need?” is the first question almost every first home buyer on the Hibiscus Coast asks me. Here is how it works.
Do you need a full standard deposit to buy your first home?
No, not always. Banks prefer a full standard deposit for an existing home, and that is the cheapest way to borrow, but it is not the only way in.
The Reserve Bank’s LVR rules limit how much lending banks can do to people with smaller deposits, rather than banning it. That means banks still lend to some buyers with a smaller deposit, usually where the income is strong and the rest of the application is clean. Space for those loans is limited, so lenders are choosy about who gets it.
What does a smaller deposit cost you?
Usually a bit more. Many lenders add a low equity margin to the interest rate, or charge a one-off low equity fee, when your deposit is below their standard level. Some lenders use lenders mortgage insurance instead.
These costs vary a lot between lenders, which is one of the reasons comparing lenders matters more when your deposit is small. The extra cost usually stops once your equity grows past the lender’s threshold, and it is worth asking how and when that is reviewed.
How does the Kainga Ora First Home Loan help with a small deposit?
The First Home Loan lets eligible buyers purchase with a much smaller deposit than banks normally ask for. It is a normal home loan from a participating lender, with Kainga Ora backing part of it so the lender is comfortable lending more.
There are income caps and price caps, and you have to be a first home buyer (or meet the second-chance criteria). The loan has to come from a lender that takes part in the scheme, so your choice of lender is narrower.
I have written a full guide on how it works: How does the Kainga Ora First Home Loan work for low deposit buyers in NZ?
Is the First Home Grant still available?
No. The First Home Grant closed in May 2024 and has not been replaced. People still search for it, so if a website or calculator still includes it, treat that information as out of date.
Can you use KiwiSaver for your first home deposit?
Yes, if you are eligible. A KiwiSaver first-home withdrawal lets you take out most of your balance to put towards your deposit, as long as you have been a member for the minimum period and leave the required minimum in your account.
If you are buying with a partner and you are both first home buyers, you can each make a withdrawal from your own account. The money is paid to your lawyer for settlement, not to you, and your KiwiSaver provider needs time to process it, so apply early.
Can family help with your deposit?
Yes, and there are two common ways. Family can give you money towards the deposit, or they can offer a guarantee backed by the equity in their own home.
How does a gifted deposit work?
A gifted deposit is money a family member gives you with no expectation of being repaid. Lenders accept gifts, but they need a signed gift letter or deed of gift confirming it is not a loan, and they will want to see where the money came from.
If the money is really a loan, even an informal one, the lender has to treat it as debt, and that reduces what you can borrow. My guide on combining the two is here: Can you use KiwiSaver and a gifted deposit together for a first home?
What is a family guarantee?
A family guarantee is where a parent or relative uses the equity in their own property to back part of your loan. It can let you buy with little or no cash deposit of your own, because the lender has extra security.
It is a serious commitment for the person giving it. If you cannot pay, the lender can call on that guarantee. Lenders require the guarantor to get independent legal advice, and the guarantee is usually limited to a set amount and released once you have built up enough equity.
Do new builds need a smaller deposit?
Often, yes. New builds are exempt from the Reserve Bank’s LVR restrictions, so some lenders will lend on a new build with a smaller deposit than they would for an existing home.
Each lender still has its own appetite and its own rules on what counts as a new build, such as a house and land package, a turnkey home or a build on your own section. The way the build is paid for also matters, and a staged build contract is assessed differently from a finished turnkey home.
There is more on this on my new build lending page.
Should you get pre-approval before you look at houses?
Yes, in most cases. Conditional pre-approval tells you what a lender will consider lending you, based on your income, expenses and deposit, before you start making offers.
It is not a final yes. The lender still needs to accept the property itself (sometimes called the security), and pre-approval usually lasts for a limited time. But it gives you a realistic budget and lets you move quickly when the right home comes up, which matters in an auction or a multi-offer situation.
What does this look like on the Hibiscus Coast?
On the Hibiscus Coast, the deposit question often comes down to the type of property. There are established homes in Orewa, Red Beach and on the Whangaparaoa Peninsula, and a lot of newer housing in Millwater and Milldale.
A first home buyer looking at an established house in Orewa and one looking at a new build in Milldale can face quite different deposit rules, even on a similar budget. Getting the lender right for that property is a big part of what I do. If you are buying locally, my Hibiscus Coast page and Whangaparaoa page cover the local questions too.
Key takeaways
- You do not always need a full standard deposit, but a smaller deposit usually costs more through a low equity margin or fee.
- The Kainga Ora First Home Loan allows a much smaller deposit for eligible buyers, within income and price caps.
- A KiwiSaver first-home withdrawal can go towards your deposit if you meet the membership and balance rules.
- Family can help with a gifted deposit, which needs a gift letter, or a family guarantee, which needs independent legal advice.
- New builds are exempt from the LVR restrictions, so some lenders accept a smaller deposit on them.
- The First Home Grant closed in May 2024.
- Most first home buyers combine two or three of these options, and pre-approval tells you where you stand before you make offers.
Frequently asked questions
Can I buy a house with no deposit in NZ?
It is rare. A family guarantee is the main way to buy with little or no cash deposit of your own, because the guarantor’s equity takes the place of the deposit. Without that, lenders expect you to contribute something yourself.
Does a bigger deposit get me a better interest rate?
Often it does. Lenders see a bigger deposit as lower risk, so you are less likely to pay a low equity margin or fee, and you may have access to more of the lender’s standard offers. Nobody can promise a particular rate, though, because it also depends on the rest of your application.
Can I use KiwiSaver and the First Home Loan together?
Yes, many buyers do. Your KiwiSaver withdrawal can make up all or part of the deposit for a First Home Loan, as long as you meet the criteria for both. Gifted funds can sit alongside them too.
How long does pre-approval last?
It depends on the lender, but it is usually a few months. If your income, debts or the market change in that time, the lender may need to reassess. Let your adviser know straight away if anything changes.
Do I still need to show savings if my deposit is a gift?
Usually, yes. Lenders like to see a history of your own saving, or of paying rent reliably, because it shows you can manage regular mortgage payments. A gift on its own can be enough for some lenders, but a record of your own saving makes the application stronger.
For a step-by-step view of the whole process, see my first home buyer guide. If you are working through this and want a no-cost conversation about your own deposit options, get in touch. I am based in Orewa and work with first home buyers across the Hibiscus Coast, Auckland and New Zealand.
JJ van der Westhuizen (FSP1000031) is a Mortgage Adviser operating under the FAP licence of Mortgage Design Limited (FSP752291). This article is general information only and does not constitute personalised financial advice.