How to get a 5% deposit home loan in NZ

Lenders generally require a 20% deposit for a home loan, because if you have less they see a higher risk that you won’t be able to repay the loan. They may be especially cautious lending to buyers with less than a 20% deposit if it’s their first home. 

The First Home Loan is a great way to get around these rules. It’s a home loan that only requires a 5% deposit because it’s backed by the government’s housing agency, Kāinga Ora. The catch is, it’s only available to first home buyers who meet eligibility criteria and lenders may charge an up front fee equal to 0.5% of the loan amount, plus a higher interest rate.  

To be eligible for a home loan with a 5% deposit via the First Home Loan scheme you’ll need to tick the following boxes:

• Be a NZ citizen, permanent resident, or a resident visa holder who’s ordinarily resident in NZ. 

• Be a first home buyer, or a previous home buyer in a similar financial position to a first home buyer. 

• Have a minimum deposit of at least 5% of the purchase price.

• Be purchasing a home for you to live in as your main home, it can’t be an investment property.  

• Not own any other property or land, except for Māori land. 

• Be purchasing a property with less than one hectare of land. 

You must also must have a before tax income from the last 12 months of:

• $95,000 or less for an individual buyer without dependents. 

• $150,000 or less for an individual buyer with one or more dependants.

• $150,000 or less (combined) for two or more buyers.

Last of all you must meet the lender’s own lending and serviceability requirements. 

Apply for a first home loan via your chosen lender’s application form or by contacting them directly, not through Kāinga Ora. The lender will walk you through the application process and eligibility criteria, providing advice to help ensure your application is successful. These are the lenders that offer First Home Loans:

• Westpac

• Kiwibank 

• The Cooperative Bank 

• SBS Bank

• Unity

• Nelson Building Society 

• NZ Home Loans (NZHL) 

Don’t apply to your bank by default - it’s always a good idea to shop around to see who’s offering the most competitive interest rates, lowest fees and best benefits for first home buyers. If you’d rather not do this on your own, a mortgage broker can help you with this. 

When you apply for your mortgage you can either ask for pre-approval or final approval:

• Go for pre-approval if you’re ready to buy a home but haven’t found the right one yet. The lender will indicate that they will lend you a certain amount then once you’ve found the right property you’ll return to the lender to gain final approval. 

• Go for final approval if you’ve found the right property and you’re ready to go. This is a formal offer of lending. 

The hardest part when buying your first home is almost always getting a deposit together, even if you’re applying for a 5% deposit home loan. Lucky for you there’s help available. Your deposit can be gifted by a relative, and you can also use the first home grant (up to $10,000 per person) and first home withdrawal from your Kiwisaver. 

Check out eligibility criteria for Kiwisaver withdrawals and grants here. 

Keep in mind that if you can save a little more and get a 10% deposit together you may be able to secure a home loan to buy a new build without higher interest rates and extra upfront fees.