I Don’t Have a 20% Deposit. Can I Still Buy a House in NZ?
Disclaimer: The below guide is general in nature and do seek individual financial advice to see how this applies to your situation. Our experienced advisers are on hand to help at no cost to you (T’s and C’s apply)
If you are currently trying to save for a house deposit while paying rent and keeping up with the rising cost of living, looking at the property market can feel incredibly discouraging.
You’ve probably heard the old rule of thumb a hundred times: “You need a 20% deposit to buy a home.”
When average NZ property values are hovering around the $900,000 mark, that 20% rule means you might be trying to scrape together $180,000 in cash. It’s enough to make you want to close your banking apps and give up entirely.
But here is the reality: You do not necessarily need a massive deposit to buy a home in New Zealand.
In fact, current market data shows that over half of all first-home buyers are successfully getting their mortgages approved with less than a 20% deposit. Let’s look at how they are doing it, what actually counts as a deposit, and how you might be closer to the property ladder than you think.
The Four Mortgage Pathways
Depending on how much you have managed to pull together from the sources above, here are the four most common ways to structure your mortgage.
1. The Kāinga Ora First Home Loan (5% to 19.99% Deposit)
The single most common way buyers get around the 20% rule is through a government-backed scheme called the Kāinga Ora First Home Loan.
Under this scheme, eligible buyers could secure a mortgage with just a 5% deposit. Because Kāinga Ora effectively underwrites the risk for the bank, participating lenders generally won't charge you their standard "low deposit" penalty interest rates.
The Catch: You have to fit into a specific box to qualify. Your gross (before-tax) income over the last 12 months must be under $95,000 for a single buyer, or under $150,000 for a couple (or a single buyer with dependants). Also, Kāinga Ora doesn't lend you the money; you still have to apply through a participating mainstream or regional bank.
2. Standard Bank Low-Deposit Loans (5% to 19.99% Deposit)
If you earn too much to qualify for the Kāinga Ora scheme, do not panic. Many mainstream banks still offer standard home loans for buyers with less than a 20% deposit.
The Reserve Bank of New Zealand places "speed limits" on how much low-deposit lending banks are allowed to do, so these approvals can sometimes be fiercely competitive. Because the bank is taking on more risk, they will usually apply a Low Equity Margin (LEM). This means your interest rate might be slightly higher than the heavily advertised specials.
While it might be slightly more expensive upfront, working with your adviser to secure a standard low-deposit loan can be a brilliant temporary stepping stone. As you pay down the loan and your property hopefully goes up in value, you will eventually build up 20% equity. At that point, we can go back to the bank and ask them to remove the extra margins!
3. Special New Build Offers (10%+ Deposit)
Looking at a brand-new townhouse or buying a house off the plans? You might be able to tap into some incredibly powerful bank incentives.
The Reserve Bank generally exempts brand-new builds from those strict low-deposit "speed limits" we just mentioned. Because new homes are energy-efficient, fully compliant with modern building codes, and less likely to have hidden maintenance nightmares, banks absolutely love lending on them.
To encourage you to build or buy new, certain major banks offer specific "New Build" mortgage packages. If you can pull together a 10% deposit, these special packages could give you access to the exact same heavily discounted interest rates and generous cash-back offers usually reserved for buyers with a massive 20% deposit.
4. The 20% Gold Standard
If you have managed to save a 20% deposit, congratulations! You have hit the gold standard of New Zealand mortgages.
Having 20% equity in the property from day one completely changes how a bank views your application. It generally unlocks the absolute best interest rates on the market, ensures you completely avoid any Low Equity fees, and gives you the widest possible pool of lenders competing for your business (including non-bank lenders if your situation is complex).
The Reality Check: Deposit vs. Repayments
While sorting your deposit is a massive win, it is only half of the puzzle. It is vital to remember that a smaller deposit means a larger loan.
Borrowing 90% or 95% of a house's value means your weekly or fortnightly repayments to the bank will be significantly higher. The bank's main focus won't just be your deposit size—they will want to thoroughly "stress test" your regular income and your monthly household expenses to make sure you can comfortably afford the mortgage long-term, even if interest rates were to go up.
See What Your Numbers Look Like
To help you visualize how your deposit size changes your options, use our dynamic calculator below to see which pathways light up for you.
The HLF Deposit Reality Checker
Slide the bars to match your deposit. Available mortgage pathways will light up below.
Available Pathways:
Adjust the sliders above to see your deposit percentage. When a mortgage pathway lights up in blue, click it to see how it works!
Let's Figure Out Your True Starting Line
The biggest mistake you can make is assuming you aren't ready based on a generic article online. Because every bank calculates your living expenses, KiwiSaver eligibility, and borrowing power differently, getting a personalized assessment is the only way to know where you stand.
