Looking to buy your first home but struggling to save for a deposit? Does it feel like no matter how much you save, you can’t keep up with rising house prices?
Generally, you need a 20 per cent deposit to qualify for a home loan – but it all depends on your individual situation. If you’ve already started saving but still have less than a 20 per cent deposit, a few first home deposit options are available to help you buy a home sooner. And with property prices rising as fast as they are, it makes sense to get into the property market as soon as you can!
Max Mortgages are experts in mortgage solutions. We offer valuable advice on first home deposit schemes so you can secure your first home with confidence.
With the government’s First Home Loan, you could buy your first home with just a 5 per cent deposit. First Home Loans are designed for first home buyers who can afford to repay a mortgage but who may be struggling to save a large deposit.
To be eligible for the First Home Loan scheme, you must:
It’s possible that first home buyers may still not have a 20 per cent deposit. If your deposit is less than 20 per cent, you have a Loan-to-Value Ratio (LVR) of more than 80 per cent, and lenders may charge you Lenders’ Mortgage Insurance.
Lenders’ Mortgage Insurance (LMI) is an insurance policy designed to safeguard the lender from financial losses if the borrower fails to make home loan repayments. It is typically applied to First Home Loans supported by Kainga Ora, where a 0.5 per cent LMI fee is charged. However, most banks have replaced LMI for loans exceeding 80 per cent of the property’s value with a Low Equity Premium (LEP) or Low Equity Margin (LEM), enabling them to manage the risk internally.
If you have less than a 20 per cent deposit, it’s important to factor in the cost of LMI, or LEP/LEM. You may want to consider partnering with non-bank lenders, as they can offer packages specifically designed for first time home buyers.
Another option for first home buyers struggling to save a deposit is the KiwiSaver First Home Withdrawal.
As a first home buyer and KiwiSaver member, you may be entitled to withdraw some of your KiwiSaver funds to use as a deposit for a first home, provided:
If you’re eligible, you can withdraw any contributions you and your employer have made, along with Government contributions and any investment returns on these amounts. You just need to leave a balance of $1,000 in your KiwiSaver account.
Some first home buyers are fortunate to have family members who can help them buy a first home. There are a few ways that family members can help first home buyers get onto the property ladder:
If you have parents or family members who own their own homes or investment properties, they may be able to act as guarantors and pledge their property as security for part of your deposit.
As a guarantor, your parents or family member can guarantee a percentage of your deposit secured against their own property. For example, if you’ve managed to save a 10 per cent deposit, your family member could guarantee the other 10 per cent to make up the required minimum 20 per cent deposit. That way, you won’t have the added expense of paying Lenders’ Mortgage Insurance.
Remember, you’ll still be responsible for repaying your mortgage, and if you default, the lender will be able to call on your parents or family members to help repay your loan. If you make repayments on time, you may be able to refinance at a later stage to remove the guarantee.
If your family can afford to help financially kick-start your home ownership dreams, the easiest way to do this is with a cash gift or a no-interest loan.
For family members who prefer not to carry the full risk as a guarantor, providing a cash gift or no-interest loan offers them a chance to help without the legal association between their own property and yours.
While most lenders will accept gifted deposits, they may prefer that at least 5 per cent of your deposit be genuine savings. So, you’ll still need some of your own savings—your KiwiSaver (if eligible) also counts as genuine savings. To learn more about genuine savings, you can consult Mortgage Advisers at Max Mortgages.
Buying your first home is an exciting experience. But it can also be incredibly challenging in many aspects, including financially. Struggling to save that all-important deposit can mean putting the brakes on your home ownership goals and even missing out on your dream home.
Don’t let a lack of deposit hold you back. Get in touch with Max Mortgages to find out more about any of the deposit options available to you as a first-home buyer. We’re already helping New Zealanders get into their first homes sooner, and we’d love to help you too.
If you don't have a full deposit saved, you may still be able to apply for a low deposit home loan or use the government's First Home Loan scheme, which allows eligible buyers to purchase a home with as little as a 5% deposit.
Yes, you can withdraw funds from your KiwiSaver towards your deposit, provided you meet the eligibility criteria, such as having been a KiwiSaver member for at least three years.
The First Home Loan scheme is backed by Kāinga Ora and allows eligible first home buyers to secure a home loan with a deposit of as little as 5%. You will need to meet the income caps and other criteria to qualify. Talk to one of our Mortgage Advisers to discuss your options.
We can provide comprehensive assistance, helping you through every step of the process. From offering support in saving for a deposit and securing home loan pre-approval to finding the right mortgage tailored to individual needs, we have you covered. Additionally, our support doesn’t stop after your home loan is settled. At Max Mortgages, we aim to build a lifelong relationship with our mortgage customers, providing ongoing support whenever you need it and ensuring that your home loan remains competitive and aligns with your changing needs.
Read how we’ve helped other Kiwis with their mortgages and home loans.
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