The Standard: The 20% Deposit Rule

In New Zealand, the Reserve Bank (RBNZ) uses Loan-to-Value Ratio (LVR) restrictions as a macro-prudential tool to ensure the stability of the financial system. These restrictions limit how much 'high-LVR' (low deposit) lending banks are legally allowed to undertake. For standard owner-occupiers purchasing an existing property, the universally accepted benchmark is a 20% deposit. This means you need to have saved, inherited, or accrued equity equivalent to 20% of the property's purchase price.

To put this into perspective, if you are looking to purchase a modest entry-level home for $700,000, a 20% deposit equates to a staggering $140,000 in cash. For many Kiwis — especially those contending with high rents in major centres like Auckland and Wellington — accumulating this much capital can take the better part of a decade. While a 20% deposit protects you from Low Equity Margins (LEMs) and secures the best advertised interest rates, it is by no means the only way to get on the property ladder.

Buying with a 5% Deposit: The First Home Loan

Recognising the massive hurdle that a 20% deposit presents, the government offers the First Home Loan (formerly known as the Welcome Home Loan), administered by Kāinga Ora. This scheme is specifically designed to get eligible first home buyers into their own homes with a deposit of as little as 5%.

Crucially, because these loans are underwritten by Kāinga Ora, banks are willing to lend 95% of the property's value without charging exorbitant low equity premiums. However, strict eligibility criteria apply:

  • Income caps: You must earn less than $95,000 before tax as a single buyer, or $150,000 combined for two or more buyers. If you are a single buyer with one or more financial dependents, the cap is elevated to $150,000.
  • House price caps: These vary significantly by region to reflect local market realities. For example, the cap might be $875,000 for a new build in Auckland, but much lower in regional centres.
  • Intent to reside: This must be your primary residence. First Home Loans cannot be used to purchase investment properties.
  • Status: You must be a New Zealand citizen, a permanent resident, or a resident visa holder who is "ordinarily resident" in NZ.
Finch Tip: First Home Loan caps and criteria are periodically adjusted by the government. Determining if your income structure (especially with bonuses or overtime) fits under the cap can be tricky. Finch checks your eligibility against the current thresholds rapidly and free of charge.

Accelerating Your Deposit with KiwiSaver

For the vast majority of first home buyers, KiwiSaver is the engine room of their deposit. If you have been a member of a KiwiSaver scheme for at least three years, you are generally eligible to withdraw almost your entire balance to put towards your first home.

Here is how the KiwiSaver first home withdrawal works in practice:

  • What you can withdraw: You can pull out your own contributions, your employer's contributions, the government contributions (formerly member tax credits), and all investment returns generated on those funds.
  • What you must leave behind: You are legally required to leave a minimum balance of $1,000 in your KiwiSaver account to keep it active. Additionally, any funds transferred from an Australian superannuation scheme cannot be used for a home deposit.

The average KiwiSaver balance for a couple in their late 20s or early 30s can often range between $40,000 and $100,000 combined. This lump sum can singlehandedly bridge the gap between renting and buying.

The First Home Grant: Closed Since May 2024

The Kāinga Ora First Home Grant used to add up to $5,000 per person for an existing home, or up to $10,000 per person for a new build. It closed to new applications on 22 May 2024 and has not been replaced, so it can no longer be part of your deposit plan.

The main government support still available is the Kāinga Ora First Home Loan, which lets eligible buyers purchase with a 5% deposit through participating lenders. Check the current criteria on the Kāinga Ora website.

10–19% Deposit Options: The Middle Ground

What if you earn too much to qualify for the First Home Loan, but you simply don't have a 20% deposit? You are in the "Low Equity" bracket (10–19% deposit), which is where strategic mortgage brokering becomes essential.

  • Main bank low-equity approvals: While the RBNZ restricts low-deposit lending, banks are still allowed to extend a small percentage of their new loans to owner-occupiers with less than 20% deposit. These limited spots are highly competitive. You generally need impeccable credit, strong income, and minimal short-term debt to secure one. Be aware that you will likely incur a Low Equity Margin (LEM) or premium on your interest rate.
  • Specialist lenders: Non-bank lenders (such as Pepper Money, Avanti Finance or Liberty Financial) aren't bound by the Reserve Bank's LVR restrictions, which apply to registered banks. Some will lend with a 10% or 15% deposit, usually at a higher interest rate.
  • Family guarantee (Springboard loans): If your parents own property in New Zealand with significant equity, they can act as a guarantor for a portion of your loan. For example, if you have a 10% deposit, your parents can guarantee the remaining 10% against their house. This allows you to borrow 100% of the purchase price minus your cash deposit, entirely avoiding low equity penalties.
  • First Home Partner (Shared Equity): Kāinga Ora’s shared equity scheme allows you to co-purchase a home with the government. If you only have a 5% deposit and the bank will only lend you 75%, Kāinga Ora steps in to buy the remaining 20% share of the house, which you slowly buy back from them over time.

Which Path Is Right for You?

The right strategy is rarely obvious. It depends on a delicate equation balancing your specific income, the geographical area you wish to buy in, your total savings, your KiwiSaver balances, and your long-term financial goals.

Finch exists to cut through this complexity. We assess every available pathway—whether it’s a standard 20% loan, leveraging a parental guarantee, or applying for specialised non-bank lending—and we present the option that gets you the keys to your new home fastest, at the most competitive long-term cost.

Use our Borrowing Power Calculator to get an initial estimate of your position, or book a free pre-approval consultation with a Finch adviser to formalise your deposit strategy.