So how do you come up with a deposit for your first home and how much do you need? There are a number of ways you can come up with your deposit. You may also use a combination of options.

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The Best Way – Good Old Fashioned Savings!

The preferred option is to have saved at least 5% (or more) towards your deposit. This demonstrates to the bank/lender that you have the capacity and discipline to manage your money. You will need to be able to provide proof that you have saved these funds. Usually the banks will accept copies of your savings account which prove your savings history.

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Present2Gifting

If you have been gifted a sum of money that you wish to put toward the purchase of your first home, this is possible, but you must provide a letter or in some cases a statutory declaration signed by the person(s) gifting the money certifying that the funds are a gift and that there is no requirement for repayment of these monies. Whilst gifting is accepted by lenders as a deposit, they generally prefer that you are contributing at least 5% yourself through saving or sale of an asset in addition to the gifted sum. LINE

Family Equity loans

Some lenders will allow you to use equity in a family member’s home as your deposit. How this works is the bank arranges 2 loans – one for the amount of the deposit (say 20%) the other loan for the balance of 80%.
Loan 1 (being the deposit) is in your name plus your family member’s name.
Loan 2 (for 80%) is in your name only
Loan 1 is for a shorter term – so that you pay it back sooner
Loan 2 is usually for a 30-year period
Important things to know about Family Equity Loans
  • In the event that you are unable to meet your repayments – your family member(s) will become liable for the repayments on Loan 1 (for the 20%)Family
  • Family members will need to complete an application form and must be in a financial position to meet repayments on Loan 1 in the event that you can’t.
  • A mortgage is taken over your family members property as security for the 20% deposit loan.
  • Once you have acquired 20% equity in the property yourself through repayment and/or capital gains your family member’s mortgage can be released.
  • Family members must seek independent legal advice before signing mortgage documents.
  • You can use family equity loans in conjunction with KiwiSaver withdrawal, and KiwiSaver first home buyer deposit subsidy and any cash savings (in which case the family loan would be less than 20% of the purchase price).

Deposit Bond Loans

A deposit bond is a guarantee used instead of cash for a deposit on a property.

This type of deposit option can be helpful in the following situations:

  • When a KiwiSaver withdrawal is required, enabling the savings to continue saving  until settlement date.
  • When there is a long settlement, for instance when buying off a plan that will take over a year to settle.

Deposit Bonds have conditions attached with them.  Contact us here to discuss using a Deposit Bond as a way to get into your first home.

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