What is the standard house deposit requirement in NZ?
A house deposit in New Zealand typically requires 20% of the property’s purchase price to satisfy Reserve Bank Loan-to-Value Ratio (LVR) restrictions. However, first-home buyers may qualify for low-deposit lending options requiring only 5% to 10% through the First Home Loan scheme, new build exemptions, or specific bank allowances for high-income earners.
Entering the New Zealand property market is a significant financial milestone, but for many aspiring homeowners, the biggest hurdle is not servicing the mortgage—it is saving the initial lump sum. Understanding the nuances of “house deposit NZ” requirements is critical in a market defined by fluctuating interest rates and strict lending criteria.
While the standard benchmark remains 20%, the landscape of lending is nuanced. From government-backed schemes to leveraging retirement savings, there are multiple pathways to secure a home loan with less cash upfront. This guide provides a comprehensive breakdown of deposit requirements, the LVR framework, and actionable strategies for Kiwi buyers.
The 20% LVR Rule Explained
The Loan-to-Value Ratio (LVR) is the primary metric banks use to assess the risk of a mortgage application. It represents the percentage of the property’s value that is mortgaged versus the percentage you hold as equity (your deposit).
What are the Reserve Bank Restrictions?
The Reserve Bank of New Zealand (RBNZ) imposes LVR restrictions to maintain financial stability. Currently, the standard restriction for owner-occupiers is a 20% deposit. This means if you wish to purchase a home valued at $800,000, banks generally require you to have $160,000 upfront.
These rules are designed to protect both the borrower and the bank. A larger deposit provides a buffer against negative equity—a situation where the mortgage balance exceeds the property’s value if house prices fall. For banks, it ensures that borrowers have “skin in the game,” statistically reducing the likelihood of default.
Exceptions to the Rule
While 20% is the standard, it is not an absolute law for every single loan. The RBNZ allows banks a “speed limit” for high-LVR lending. Banks can lend a small percentage of their total new residential mortgage money to owner-occupiers with less than a 20% deposit. This creates a competitive environment where banks reserve these limited spots for their strongest applicants—typically those with high reliable income and minimal other debts.
Low Deposit Lending Options (10% or 5%)
For many first-home buyers, saving a 20% deposit is increasingly difficult as house prices outpace wage growth. Fortunately, there are structured pathways to purchase a home with a deposit as low as 5% or 10%.
The Kāinga Ora First Home Loan
The First Home Loan is a government-underwritten initiative designed to help Kiwis buy their first property with a 5% deposit. Because Kāinga Ora underwrites the loan, banks face less risk and can lend to borrowers who fall outside standard LVR criteria.
To qualify, you must meet specific criteria:
- Income Caps: You must earn $95,000 or less before tax for an individual buyer without dependents, or $150,000 or less for an individual with dependents or two or more buyers combined.
- Deposit: You must have a minimum of 5% of the purchase price.
- Residency: You must be a New Zealand citizen, permanent resident, or a resident visa holder who is “ordinarily resident in New Zealand.”
Note: As of May 2024, the First Home Grant (the free cash grant) was discontinued, but the First Home Loan (the low deposit access) remains active.
New Build Exemptions
New Zealand’s lending rules heavily favor the construction of new housing stock. Under current LVR rules, new builds are often exempt from the standard 20% deposit requirement. This means banks can lend up to 90% (requiring only a 10% deposit) for a turnkey package or a house-and-land package without it counting towards their high-LVR “speed limit.”
The Cost of Low Deposit Lending
Borrowing with less than 20% equity often comes with additional costs. Banks may apply a Low Equity Margin (LEM) or a Low Equity Premium (LEP). This is usually an interest rate surcharge (e.g., +0.25% to +1.00%) or a one-off fee added to the loan. This surcharge reflects the higher risk the bank is taking and remains until your equity in the property reaches 20%.
Using KiwiSaver for Your Deposit
For the vast majority of first-home buyers in New Zealand, KiwiSaver forms the bulk of the deposit. The KiwiSaver First Home Withdrawal scheme allows you to withdraw your savings to buy your first home.
What can you withdraw?
You can withdraw almost your entire balance, including:
- Your contributions
- Your employer’s contributions
- Government tax credits (Member Tax Credits)
- Interest and investment returns
You must leave a minimum balance of $1,000 in your account. You also cannot withdraw any funds transferred from an Australian complying superannuation scheme.
Eligibility Criteria
To use your KiwiSaver, you must have been a member of the scheme for at least three years. It does not matter if you have changed providers during this time; the three-year clock starts from your very first contribution.
You must intend to live in the property (it cannot be an investment property initially), and it must be located in New Zealand. While primarily for first-home buyers, “Second Chance” buyers (previous homeowners who no longer own property and are in a similar financial position to a first-home buyer) may also apply through Kāinga Ora to access their funds.
Guarantors and Gifting Rules
If your personal savings and KiwiSaver do not meet the 20% threshold, or if your servicing ability is tight, family support is a common solution. This is often referred to as the “Bank of Mum and Dad.”
Gifting Funds
Parents can gift cash to help children reach the deposit threshold. However, banks are very strict about the nature of this money. It must be a non-refundable gift, not a loan.
Banks will require a signed “Deed of Gift” or a gifting certificate. This legal document confirms that the money does not need to be repaid and that the parents have no financial interest in the property. If the money is a loan, the bank will treat it as a debt, which reduces the amount you can borrow for the mortgage.
Guarantees
Alternatively, parents can offer a limited guarantee. This usually involves using the equity in the parents’ own home as security for the deposit portion of the child’s loan. For example, if you have a 10% deposit, your parents can guarantee the remaining 10%.
This allows you to avoid Low Equity Margins and secure standard interest rates. However, it carries risk for the guarantors: if you default on your mortgage, the bank can theoretically call on the parents to repay the guaranteed portion, potentially putting their own home at risk. Legal advice is mandatory for guarantors in these transactions.
Additional Costs Beyond the Deposit
When calculating your “house deposit nz” target, ensure you have cash set aside for immediate upfront costs. Your deposit is usually paid to the real estate agent upon the agreement going unconditional, but other fees arise during the due diligence process.
- Registered Valuation ($800 – $1,200): Often required by banks for low-deposit lending or private sales to confirm the purchase price aligns with market value.
- Building Inspection ($600 – $1,000): Essential for checking the structural integrity and weathertightness of the property.
- Solicitor Fees ($1,500 – $2,500): For conveyancing, title checks, and transferring funds.
- LIM Report ($300 – $500): Provided by the council, detailing zoning and consents.
It is prudent to have at least $3,000 to $5,000 in available cash outside of your deposit funds to cover these expenses without dipping into your mortgage equity.
People Also Ask
Can I buy a house with a 5% deposit in NZ?
Yes, you can buy a house with a 5% deposit in NZ, primarily through the First Home Loan scheme underwritten by Kāinga Ora. Alternatively, some banks may offer 5% deposit loans for new builds or to high-income earners with strong credit histories, though this is less common than 10% or 20% requirements.
How much deposit do I need for a $800k house?
For a house costing $800,000, a standard 20% deposit would be $160,000. If you qualify for low-deposit lending at 10%, you would need $80,000. Under the First Home Loan scheme (5% deposit), you would need $40,000, provided you meet the income caps and lending criteria.
Do I need a 20% deposit for a new build?
Typically, no. New builds are generally exempt from the Reserve Bank’s LVR restrictions. Most lenders only require a 10% deposit for a new build property, making them an attractive option for buyers who are struggling to save the full 20% required for existing properties.
Can I use my KiwiSaver for a house deposit twice?
Generally, the KiwiSaver withdrawal is a one-off benefit for first-home buyers. However, if you are a “Second Chance” buyer—someone who has owned property before but no longer does and is in a financial position similar to a first-home buyer—you may apply to Kāinga Ora to determine if you are eligible to withdraw your funds again.
What is a Low Equity Margin?
A Low Equity Margin (LEM) is an extra interest charge added to your mortgage rate if your deposit is less than 20%. It covers the increased risk to the bank. The margin usually ranges from 0.25% to 1.00% per annum and can be removed once your property value increases or you pay down the loan enough to reach 20% equity.
Does the First Home Grant still exist?
No, the First Home Grant was discontinued by the New Zealand Government in May 2024. While you can no longer apply for the free cash grant, the First Home Loan (which allows for a 5% deposit) is still available for eligible buyers.
