Buying guide

How much deposit do first home buyers need?

It may seem like you’ve got a mountain to climb, but with a little help it’s possible

20 December 2023

Buying your first home is a huge challenge, there’s no point in sugarcoating it. But with a little luck, a lot of saving, and the right help, it’s possible.

The first step towards buying your first home should be saving the deposit and unfortunately this may also be the most difficult part. So to help get you started, we asked and answered the question – how much deposit do first home buyers need?

First home buyers deposit amount

It’s always best to aim to save a deposit equal to 20% of your property’s purchase price, as this is the minimum lenders will require in most cases. However, if that’s not possible you may be able to buy a home with just a 10% or even 5% deposit as a first home buyer.

If you do buy with a deposit smaller than 20% you may be classed a ‘low equity borrower’ by your bank and they may charge you extra fees or higher interest rates.

How to buy a home with a 10% or 5% deposit

It’s possible in some cases to buy your first home with a small deposit, however you’ll need to either find the right lender and fit their criteria, get help from family, or qualify for government assistance.

Find the right lender

There are strict laws that limit the proportion of lending that lenders can do to borrowers with deposits less than 20%. That means if a lender is close to their limit,or at their limit, they may be unwilling to offer further low deposit loans – whereas if a lender has plenty of room left before they hit their limit they will be more willing.

The trick is finding the banks with room for more low deposit lending. In this situation it can be a great idea to speak to a mortgage broker as they’ll have a clear understanding of each lender’s situation and be able to guide you towards one that’s most likely to accept your application.

Buying your first home in New Zealand isn't easy but it's possible with a little help.

Get help from family

If your family doesn't have cash to help you with your deposit, but they do own property, you could be in luck. Many lenders will lend with as little as 5% deposit if your family member uses their home as security against your loan as either a co-borrower or guarantor.

Keep in mind this does mean that if you’re unable to make your mortgage repayments your parents may be responsible for them - and the bank could eventually sell their house to recoup the loan money if repayments aren’t made over a long period of time.

Qualify for government assistance

You may be able to secure a home loan underwritten by the government with just a 5% deposit if you meet eligibility criteria for the First Home Loan. Select lenders offer these loans and to qualify you must be a New Zealand citizen, earn under a certain amount, be a first home buyer and be purchasing a home to live in as your primary residence.

KiwiSaver withdrawals and KiwiSaver HomeStart Grant

Using your Kiwisaver is one way to help boost your deposit to afford your first home. There are two ways you may be able to use yours:

  1. Kiwisaver withdrawal

If you’re eligible you can withdraw any amount from your Kiwisaver as long as you leave $1,000 and any amounts transferred from Australian superannuation schemes.

  1. Kiwisaver First Home Grant

If you meet eligibility criteria you may also be able to apply for a government grant to help fund your first home purchase. This can be used to contribute to your first home deposit.

The amount varies depending on how long you’ve been a member of Kiwisaver and what type of property you’re buying. If you’re buying an existing home the First Home Grant is $1,000 per year that you’ve made minimum Kiwisaver contributions (up to a maximum of $5,000). If you’re buying a new build or land to build on it’s double.

Read more about Kiwisaver withdrawal and the Kiwisaver First Home Grant.

There is government assistance available for ellignble first home buyers.

Improving your chances as a low deposit first home buyer

When you’ve got a low deposit as a first home buyer it’s absolutely essential that you paint an attractive picture for lenders. That means having:

  • As much genuine savings as possible (that means money you’ve put aside like Kiwisaver, savings or investments - as opposed to grants or gifts)
  • Stable, long term employment.
  • A good credit score.
  • Minimal debt.
  • Proof in your bank transactions that you’re earning more than you spend.
  • Good financial habits, including minimal defaults, late payments and dishonour fees.

While you’re applying it’s also important that you don’t make any major changes to your financial situation like applying for a car loan, changing jobs or making large purchases.

The pros and cons of low deposit home loans

Getting a first home loan with a low deposit is a great way to get into a home earlier, with less cash down, but it’s not all roses. You may pay a higher interest rate, your loan will be larger with higher repayments and it may take longer to pay off.

It’s important to be aware of the downsides and carefully weigh your options before committing to a low deposit loan to make sure this is the best choice for you. And if you’re not sure, always speak to a financial advisor and/or mortgage broker for expert advice and help doing your sums.

*We hope this article has provided some helpful information. It's based on our experience and is not intended as a complete guide or as financial advice. Of course, it doesn’t consider your individual needs or situation. If you're thinking about applying for a home loan you should always get specific advice from an expert.


Ben Tutty
Ben Tutty

Ben Tutty is a regular contributor for Trade Me and he's also contributed to Stuff and the Informed Investor. He's got 10+ years experience as both a journalist and website copywriter, specialising in real estate, finance and tourism. Ben lives in Wānaka with his partner and his best mate (Finnegan the whippet).