The 2 meanings of the word ‘deposit’

Our first home buyer member Shannon asked us the following question;


Can your kiwisaver savings go towards the deposit of your first home, or can it only go towards the mortgage itself once the deposit has been paid?

Our answer;

The term ‘deposit’ can be a little confusing as it is used in 2 contexts with respect to buying a property – firstly the banks use the term ‘deposit’ to describe the amount of money you are contributing to the purchase of the property. The second context is with respect to the amount you need to pay the Real Estate company once the offer you have made on a property has been accepted and has become ‘unconditional’  If you are using KiwiSaver for your deposit (ie your contribution to the purchase) you cannot use this for the deposit you need to pay to the Real Estate Company when you go unconditional – this is because the KiwiSaver providers will only release these funds on the day of your settlement on the property.

If you don’t have access to your own funds to pay the deposit when you have gone unconditional – you can usually borrow these funds from the bank who has agreed to give you a mortgage – this can be a little bit expensive as these funds are lent to you on an ‘unsecured’ basis. In this situation we recommend negotiating the amount you pay when going unconditional to as little as possible so as to reduce your interest costs.