The main pain point for many first home buyers is saving the minimum deposit needed to get into their first home. However, many make the mistake of assuming their only options is a 20% deposit but, this is not the case.
When first home buyers start the process the first question asked is:
"How much do I need for a deposit?"
The answer to this is not as straight forward as it seems.
Let's explore some scenarios...
35% Deposit
When purchasing your first home as an investment property (you won’t be living in it / is a rental property.) The minimum deposit you'll need is now 35% of the purchase price when buying an existing home. This was updated by the Reserve Bank in 2023, from a minimum deposit requirement of 40%!
20% Deposit:
This is still the most commonly talked about option as this is a regulation set by the Reserve Bank of New Zealand (RBNZ) when purchasing an existing property to live in. A minimum deposit of 20% is the "ideal" target to aim for as with a minimum deposit of 20%, you will be offered special rates by the bank and won't be charged additional low equity fees (*T&C's). However, this isn't the only option for first home buyers.
Note: First home buyers looking to purchase an investment property can use a 20% deposit when purchasing a new build as these are exempt from the RBNZ regulation stating the minimum 35% deposit shown above.
10% Deposit:
There are a range of situations in which 10% is enough to get you on the property ladder:
Purchasing a new build, land & build package or turn-key property that you plan to live in. New builds/construction loans are exempt from the RBNZ regulation stating the minimum 20% deposit.
Purchasing property (existing or new build) with a First Home Loan through Kāinga Ora. You will need to satisfy both Kāinga Ora and the Bank facilitating the loan's policy/criteria.
Purchasing an existing property and applying to a Bank who’s accepting non-RBNZ exempt applications for first home buyers with less than 20% deposit. If you're considering this option, working with a mortgage adviser early is key.
5% Deposit:
You can purchase your first home with as little as a 5% deposit. This option is only available when purchasing property (existing or new build) with a First Home Loan through Kāinga Ora. You will need to satisfy both Kāinga Ora and the Bank facilitating the loan's policy/criteria. This will need to be 5% cash savings (Kiwisaver included) as many Banks have this as a minimum in their policy.
Okay, now what?
As you can see there are a range of deposit options for first home buyers in 2024. Having a balanced conversation with a mortgage adviser is crucial to exploring which is most suitable for you and understanding the process required.
To see if you qualify for a First Home Loan with Kāinga Ora visit the link below:
There is also a First Home Grant (Totally seperate from a First Home Loan) you can apply for to add to your deposit funds. To see if you qualify visit the link below:
*This article is are based on current RBNZ & government regulation as of February 10th 2024. This is not financial advice and subject to change and lender policy.
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