Most lenders ask for a 20 per cent deposit, and in Auckland that can feel out of reach. The good news is that a smaller deposit can still be an option in some situations. It comes with extra rules, extra costs and extra risks, so it pays to understand it first. This guide explains how low-deposit lending works and what to talk through with a licensed adviser.
How Much Deposit Do You Actually Need?
If you're a first home buyer Auckland has plenty of options for, the deposit is often the biggest hurdle. Here is a simple example using a $750,000 home:
- 20 per cent deposit: $150,000
- 10 per cent deposit: $75,000
- 5 per cent deposit: $37,500
The smaller the deposit, the bigger the loan. A 5 per cent deposit means borrowing $712,500 in this example, which means higher repayments and more interest.
Why Lenders Treat Smaller Deposits Differently
Lenders compare your loan to the value of the property. This is called the loan-to-value ratio, or LVR. When your deposit is under 20 per cent, a few things usually happen:
- Reserve Bank rules limit how many loans lenders can make with a small deposit, so lenders can be selective
- Some lenders add a low equity margin, which is an extra amount on your interest rate
- Lenders may look more closely at your income, spending and savings history
These rules can change, so your adviser will check what applies when you apply.
KiwiSaver Withdrawal
Many first home buyers use their KiwiSaver savings for the deposit. You generally need three years of membership, and a small balance must remain in your account.
Family Support
Some buyers get help from family, such as a gifted deposit or a guarantee. These arrangements carry legal and financial risks, so everyone involved should get their own legal advice.
New Builds
Reserve Bank rules and lender policies can treat new builds differently from existing homes. Your adviser can explain what applies at the time.
Risks to Weigh Up
- A bigger loan means higher repayments, which can be harder to manage if rates rise
- A small deposit leaves less equity, so a fall in property values has a bigger impact
- Extra costs, such as a low equity margin or insurance fee, can add up over time
- You still need cash for legal fees, reports, insurance and moving costs
It's worth asking yourself whether you're comfortable with the repayments for the long term, not just the first year.
How a First Home Loan Broker Helps
A first home loan broker works with a panel of lenders, so they can explain how each one treats small deposits and which options may suit you. They check your budget, help gather your documents and guide you through each step to settlement. For a closer look at when it pays to use a first home buyer mortgage broker, read this decision guide for first home buyers.
Many people also prefer a first home buyer broker near me, so they can sit down together and go through the numbers in person.
A Simple Checklist for a First Home Buyer in Auckland
- Work out your budget and how much deposit you really have.
- Check your KiwiSaver balance and how long you've been a member.
- Ask an adviser whether the First Home Loan or another option could suit you.
- Get your documents ready: ID, income records, bank statements and debts.
- Plan for extra costs, such as legal fees and insurance.
- Keep a cash buffer for repairs and rate changes.
Talk It Through With a Local Adviser
If you're working out how to buy your first home, the licensed mortgage advisers at Capital Finance can look at your deposit and options, compare lenders from our panel of 20+ lenders and guide you through to settlement. Capital Finance is paid commission by lenders. Our Papakura office is open Monday to Friday, 9am to 6pm, or call 0800 626 685.
FAQ
Will a smaller deposit cost more?
Often, yes. You borrow more, and some lenders add a low equity margin. Ask your adviser to show you the numbers.
Is the First Home Grant still available?
No. It closed to new applications in May 2024. KiwiSaver withdrawal and the First Home Loan are the main pathways now.
Can my family help with my deposit?
Sometimes. Lenders may look at how the money is being provided, so talk to your adviser and lawyer first.
Do I pay a mortgage adviser?
In many cases the lender pays the adviser a commission. Some situations may involve a fee, and a licensed adviser should explain any cost up front.
