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.
Low Equity Premium (LEP)
An upfront fee based on your loan size, charged by some banks instead of LEM.
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
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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
Learn More About First Home Loan →
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 →
Frequently Asked Questions
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Chat with a First Home Buyers Club affiliated mortgage adviser - no obligation!
Have a question about this?
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