Disclaimer:
The information on this website is for general guidance only and does not constitute financial or investment advice. Always do your own research and seek personalised advice from a qualified financial adviser or mortgage adviser before making financial decisions.
Key Takeaways
- Loans with less than 20% deposit are harder to get and more expensive
- Minimum 10% deposit loans are available but come with additional fees
- New builds are exempt from LVR restrictions, allowing 10% deposits
- First Home Loan scheme allows 5% deposit for eligible buyers
- Low equity fees include LEM (added to interest rate) or LEP (upfront fee)
Loans requiring less than 20% deposit are significantly more difficult and expensive to obtain. However, options do exist for first home buyers who haven't saved a full deposit. Understanding your options and the associated costs can help you make the best decision for your situation.
Why Get a Low Deposit Loan?
The main advantage of a low deposit loan is that it allows you to enter the property market sooner. With a 10% deposit instead of 20%, you could purchase your first home years earlier than if you waited to save the traditional deposit amount.
However, lenders must assess your serviceability at higher stress-tested rates under the Responsible Lending Code. This ensures you can still afford repayments if interest rates increase.
Fees for Low Deposit Loans
Low Equity Margin (LEM)
An additional 0.25% to 1.5% added to your interest rate for loans over 80% LVR.
This is an ongoing cost that increases your regular mortgage payments.
Low Equity Premium (LEP)
An upfront fee based on your loan size, charged by some banks instead of LEM.
This is a one-time cost that can sometimes be added to your loan.
Other Costs to Consider
- Legal Fees: Variable by solicitor - shop around for the best rates
- Registered Valuation: From $850+ depending on property value, size, and location
Achieving 80% Lending
If you can reduce your borrowing from 85% to 80% LVR, you'll access better interest rates and avoid low equity fees. Even a small increase in your deposit can make a significant difference to your ongoing costs.
What Banks Look For ("Getting to Yes")
Strong Applications Feature:
- Excellent credit history with no defaults or missed payments
- Saved deposit (not borrowed) demonstrating financial discipline
- Strong financial management and good account conduct
- Significant monthly surplus after all expenses
- Minimal existing debt (credit cards, personal loans, BNPL)
- Stable, long-term employment history
Need personalised guidance?
Chat with a First Home Buyers Club affiliated mortgage adviser - no obligation!
Low Deposit Options
First Home Loan (Kainga Ora)
Requirements:
- 5% non-borrowed deposit
- Must be a first home buyer
- Income limits: $95,000 (single) or $150,000 (with dependents or multiple buyers)
- Must be NZ citizen or permanent resident
- Property must be your primary residence
- Cannot own other properties
Fees: $400 application fee + 1.2% lender's mortgage insurance
New Build (10% Deposit)
New builds are exempt from LVR restrictions, allowing banks to accept 10% deposits. This makes new construction a popular option for first home buyers who haven't saved a full 20% deposit.
While you still need to meet affordability criteria, the 10% deposit option for new builds can get you into your first home sooner. Learn more about new builds →
Ready to Explore Your Options?
Take our free Home Readiness Quiz to see where you stand, or book a consultation with a mortgage adviser to discuss your low deposit options.
Frequently Asked Questions
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