The short answer most people get is 20%. And while 20% is a useful number, it's not the whole story — and for first home buyers in particular, it can make the goal feel further away than it actually is.
There are legitimate pathways to buying with as little as 5% deposit in New Zealand. Whether those pathways are open to you depends on your income, your KiwiSaver or deposit balance, and the purchase price. Here's how it all works.
Why 20% is the standard — and what happens below it
New Zealand banks operate under LVR (Loan to Value Ratio) restrictions set by the Reserve Bank. LVR is simply your loan as a percentage of the property value — we've written a full explainer on how LVR works if you'd like the detail. The short version: for owner-occupiers, banks are generally required to keep the majority of their lending at or below 80% LVR — meaning you need at least 20% deposit to be in the mainstream lending pool.
If your deposit is below 20%, you're in what's called the low equity space. Banks can still lend to you — there's a small allocation they're allowed to use for high-LVR owner-occupier loans — but it comes with a cost. Most banks charge a low equity margin on top of the standard interest rate, typically between 0.25% and 1% depending on your LVR. On a $700,000 mortgage, an extra 0.5% is $3,500 a year. It's not nothing.
That said, having 10% deposit is genuinely workable. And having 5% can be enough if you're eligible for the First Home Loan.
The First Home Loan — buying with 5%
The First Home Loan is a government-backed scheme administered through Kāinga Ora. It allows eligible first home buyers to purchase with a 5% deposit, with the government underwriting a portion of the loan. Banks that participate — including most of the major lenders — are allowed to lend above their normal LVR limits for these loans.
To qualify you need to meet income caps, which are currently set at $95,000 before tax for a single applicant and $150,000 for joint borrowers. There are also house price caps that vary by region — the caps for Auckland are higher than for provincial areas. The property needs to be a new or existing home that you'll live in, not an investment.
One thing worth knowing: the First Home Loan comes with a Lender's Mortgage Insurance (LMI) premium — a one-off charge set by Kāinga Ora, currently 1.2% of the loan amount. On a $500,000 loan that's $6,000. You can pay it in cash at settlement, or capitalise it into the loan and repay it gradually alongside your mortgage. Because the loan is government-backed, First Home Loan borrowers typically access standard bank interest rates rather than the higher rate loading that applies to regular low-equity lending — so the insurance replaces the margin rather than adding to it. How the premium is structured and processed does vary between participating lenders. Once your equity reaches 20%, you can refinance and the cost no longer applies.
KiwiSaver — how much can you actually use?
If you've been contributing to KiwiSaver for at least three years, you can withdraw most of your balance to put toward your first home. You have to leave $1,000 in the account, but everything else — your contributions, your employer's contributions, and the government's member tax credits — can come out.
For a lot of first home buyers, KiwiSaver is the biggest chunk of their deposit. If you've been in KiwiSaver for five or six years on a decent salary, it's not unusual to have $30,000 or more available. That can be the difference between having a 5% deposit and having a 10% one.
The mechanics are straightforward: your KiwiSaver provider releases the funds directly to your solicitor on settlement day. You don't receive the money yourself — it goes straight into the purchase.
What else counts as deposit?
Banks are primarily interested in where your deposit came from. Genuine savings — money you've accumulated over time in a savings account — are the most straightforward. But there are other sources they'll generally accept:
- KiwiSaver withdrawal — as above, fully accepted by all lenders
- Gifted deposit from family — accepted by most banks, usually with a signed declaration that it's a gift and not a loan. Some lenders require a certain portion to be your own savings.
- Proceeds from the sale of assets — a car, shares, an inheritance. Needs to be documented.
- Term deposit or savings accounts — straightforward genuine savings
What doesn't count: borrowed funds (a personal loan or credit card advance used as a deposit is a red flag), and undocumented cash. Banks want a clean paper trail.
A rough guide to deposit thresholds
| Deposit | What it means | Typical cost |
|---|---|---|
| 5% | First Home Loan eligible borrowers only; income and price caps apply | Low equity margin applies |
| 10% | Possible with most mainstream lenders; subject to bank appetite | Low equity margin applies |
| 20%+ | Standard lending; no low equity margin | Best available rates |
What the low equity cost looks like in practice
The table below shows figures per $100,000 of purchase price — multiply by your actual purchase price to get your numbers. For example, for an $800,000 home, multiply each figure by 8.
| LVR | Deposit per $100k | Loan per $100k | Typical low equity cost | Extra interest per year* |
|---|---|---|---|---|
| 80% | $20,000 | $80,000 | No margin | — |
| 85% | $15,000 | $85,000 | ~0.25% | ~$213 |
| 90% | $10,000 | $90,000 | ~0.50% | ~$450 |
| 95% | $5,000 | $95,000 | ~0.75–1.00% | ~$713–$950 or upfront fee |
*Indicative annual interest cost of the low equity margin only, based on the loan amount. Margins vary by lender. One lender also offers 95% lending outside the First Home Loan scheme for eligible buyers — without the income or price caps that apply to the scheme.
The costs beyond the deposit
Your deposit isn't the only money you need on settlement day. There are a few other costs to budget for:
- Solicitor/conveyancing fees — typically $1,500–$2,500 for a standard residential purchase
- Building inspection — $500–$1,000 depending on the property and inspector
- Registered valuation — some lenders require one; typically $700–$1,200
- LIM report — around $300–$400 from most councils
- Moving costs — easy to forget until you're doing it
Budget at least $5,000–$7,000 on top of your deposit for purchasing costs, and make sure that money is sitting separately — don't count it as part of your deposit.
So — what number should you actually be aiming for?
It depends on where you're buying and what your household income looks like. As a starting point: if you're buying in Auckland and your combined income is under $150,000, look at whether the First Home Loan works for your target price range. If you're over those thresholds, getting to 10% and going through a mainstream lender is achievable — you'll pay a margin but you'll be in the market sooner rather than later.
Getting to 20% is ideal from a pure cost perspective, but for many buyers — especially in Auckland — it means waiting several more years. Sometimes the cost of that wait, in terms of rising purchase prices and rent paid in the meantime, is higher than the low equity margin you'd otherwise avoid.
It's a calculation worth doing properly rather than defaulting to a number someone gave you years ago.
If you want to talk through your actual numbers — KiwiSaver balance, savings, target purchase price — get in touch. We can tell you pretty quickly where you sit and what your realistic options look like.
Want to know where you actually stand?
Try our calculators or get in touch to talk through your numbers.