First home buyers: you may not need a 20% deposit
From Aaron’s TikTok: “First Home Buyers Only.”
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Posted 18 January 2025
The short version
- The "you need 20%" rule is not the whole story. Banks can and do lend above 80% to first home buyers.
- KiwiSaver plus a First Home Loan can get eligible buyers in with as little as 5% deposit.
- Low-deposit lending comes with extra costs and tighter checks. The trade-off is getting in years sooner.
- Which door is open to you depends on income, region and the property. This is exactly what an adviser maps out.
Where the 20% number comes from, and why it is not a wall
Loan-to-value rules limit how much low-deposit lending NZ banks can do, so 20% became the number everyone repeats. But banks keep a portion of their lending specifically for over-80% loans, and first home buyers are the main people they use it for. A strong application with a 10% deposit gets approved every week.
Low-deposit loans do cost more: banks charge a low-equity margin or premium, and the servicing tests are stricter. The question is not "is a smaller deposit allowed?" It is "does getting in now, at this cost, beat renting while you save for years?" Often the answer is yes.
The 5% route: KiwiSaver + First Home Loan
For eligible buyers, a Kāinga Ora-backed First Home Loan through participating lenders needs just 5% deposit. Stack that with your KiwiSaver first-home withdrawal, which for most people is most of the deposit, and the amount of extra cash savings you need can be surprisingly small.
There are income caps and regional house-price realities to work through, and not every lender or every property qualifies. But if you have been quietly assuming you are years away from a deposit, this is the sum worth checking before you settle in to wait.
Get someone on your side of the table
Every bank treats low-deposit lending differently, and appetite changes month to month. An adviser knows which lender is saying yes to your shape of application right now, and structures it so you are not paying more low-equity cost than you need to. That advice costs you nothing: the lender pays the adviser, not you.
This is general information, not personalised financial advice. For advice on your situation, talk to Aaron.
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