Low Deposit Home Loans: What You Need To Know About Getting One

First Home Buyer Options For Low Deposit Home Loans

As a first home buyer we know one of the biggest hurdles is getting together a deposit.  With the banks currently restricted by the Reserve Bank, the banks are becoming increasingly picky about who they will lend to.  Know what low deposit home loans options are available can mean getting the green light from your lender.

Low Deposit Home Loan Options:

  • First Home Loan

Finding the deposit for your first home can be a struggle, with most lenders currently requiring a minimum 20% deposit. But with a First Home Loan you only need a 5% deposit which means getting into your first home is that much easier.

First Home Loans are issued by selected banks and other lenders, and underwritten by Housing New Zealand. This allows the lender to provide loans that would otherwise sit outside their lending standards. However there are particular requirements to be eligible.

Eligibility criteria:

  • Income
    You can have a maximum yearly income of up to $85,000 (before tax) for 1 person. Or a combined maximum yearly income of $130,000 (before tax) for 2 or more people.
  • Minimum Deposit
    You will need a minimum 5% of the purchase price of the house you are wishing to buy.
  • New Zealand Citizen
    You are a New Zealand citizen or permanent New Zealand resident.
  • House Price Cap
    The price of the house you are buying with a Welcome Home Loan must be less than the regional house price cap.

The region house price caps as at 1st April 2020 are:


House price cap for existing/older properties

House price cap for new properties

Auckland, Queenstown Lakes



Hamilton City, Tauranga City, Western Bay of Plenty District, Kapiti Coast District, Porirua City, Upper Hutt City, Hutt City, Wellington City, Tasman District, Nelson City, Waimakariri District, Christchurch City, Selwyn District, Queenstown Lakes District



Rest of New Zealand



For help in applying for a First Home Loan click here

  • Co-Ownership or Shared Ownership

Co-Ownership is where a home buyer purchases the portion of a house they can afford now with the rest being topped up by another party in return for an equity charge.  When the home buyer is able to afford to buy more, they ‘step ladder’ their share of ownership until they are able to own the home outright.

Co-Ownership is not a concept that New Zealanders are very familiar with.  However in February 2020 there are approximately 157,000 households in England in shared ownership.  Additionally, the New Zealand Housing Foundation (from which the YouOwn model was developed) has been used as a homeownership model for over 15 years.

Here in New Zealand, YouOwn runs a co-ownership program specifically for first home buyers.

Low Deposit Home Loans

The key benefits of Co-Ownership are:

  • A deposit requirement of 5%.
  • Access to the Bank’s special interest rates, avoiding the low deposit fees.
  • A step-ladder into your first home sooner, removing the stresses of renting or anxiety as house prices continue to rise.


  • Low Deposit Home Loan From Non-Bank Lenders

The term “Non-Bank”, “NonBank” or “Bank Alternative” quite simply means those lenders who are involved in the business of providing finance, but are not the registered Banks like ANZ Bank, ASB Bank, HSBC, Kiwibank, Bank of New Zealand, Rabo Bank, TSB & Westpac. Non-Bank lenders therefore includes recognised names like Sovereign & AMP, who are both also leaders in Insurance, Resimac Home Loans and Building Societies such as Napier and Wairarapa.

  • Use just 10% Deposit to Get a Home Loan

A Low Deposit Home Loan gives you the opportunity to live in your own home, being a dream of most New Zealanders, despite the new Reserve Bank rules which restrict home ownership for first home buyers.

More people are now looking to Non-Banks and private lenders for help as the traditional High Street Banks are making home loans and mortgages beyond the reach of so many hard working and ambitious home buyers.

  • New Build Require Less Deposit

Houses purchased before construction has started are exempt from the Reserve Bank’s LVR restrictions. This means banks don’t have to squeeze the loan into their 10% higher-risk lending category.

The ideal way to make use of this is with a house and land package from a reputable home building company.

The added bonus of this approach means you have the time during the construction period to contribute more savings to your settlement purchase as well as take advantage of any potential capital gain.

Still not able to meet the requirements for low deposit home loans?

As alternatives you could also consider the following options to get the deposit:

  • Guarantor

As an alternative, your family can provide a guarantee over your loan if you have little or no deposit. This allows them to use their assets without having to provide any money up front. You must however ensure you are able to meet the payment requirements of your home loan.  The guarantor also needs to understand the obligations, therefore legal advice is strongly recommended.

  • Gifting

As the name implies, gifting is when your parents or other people can gift you some of the amount you need for your deposit, so you can apply for a home loan. You’ll need to show where the money came from, but your gifters won’t have any ongoing obligations to the bank.

  • Teaming Up For Your First Home

With the difficulties New Zealand first home buyers are having getting into their first home, many are looking to less traditional ways to get on the property ladder. One such way is teaming up with friends, family or acquaintances to buy a house together.

The two most common forms of joint residential property purchases are Joint Tenancy and Tenants In Common. Understanding the differences between them is important to avoiding potential risks.

For tips about what to consider when joining forces to buy a home, visit here

  • KiwiSaver Withdrawal

Using your KiwiSaver to contribute towards your deposit is now becoming a key way for first home buyers to get a deposit together. The key requirements to qualify for KiwiSaver Withdrawal are that you have contributed for at least 3 years and that you intend to live in the home.

For more information on KiwiSaver Withdrawal visit here 

  • First Home Grant

In addition to KiwiSaver Withdrawal, the First Home Grant can provide up to $10,000 per person towards a deposit for their first home. The key requirements for the First Home Grant are that you have contributed for at least 3 years to KiwiSaver, your income is below $85,000 (before tax) for a single person or $130,000 (before tax) for two or more people and that your property is under the region house cap.

For more information about First Home Grant requirements visit here 

Overcoming deposit hurdle is always going to be a challenge, however knowing what the options for low deposit home loans are could mean getting the green light for your first home.

To get in touch with an advisor to get planning for your first home, complete the below form:


Dustin Lindale March 10, 2017 Blog, Tips for First Home Buyers