What can make up a house deposit?
Generally, in New Zealand the standard amount required for a house deposit is 20% of the value of the property. So, for an $800,000 property, you will need a $160,000 (20%) deposit. This might seem daunting, however, don't lose heart, there are certain circumstances where you can buy with less than a 20% deposit if you need to and we can walk you through your options as you go through the application stage. Some things considered are a person’s income, existing debts and whether they fit a bank’s criteria. However, it’s worth noting that lower deposits can make for higher interest rates as they are considered higher risk by the banks.
The most common sources of funds for deposits are explained here:
KiwiSaver First Home Withdrawal - If you’ve been with KiwiSaver for at least three years, you may be able to withdraw most of your KiwiSaver funds to put towards your first home. You must leave a minimum of $1000 in the fund. In some cases, it may be a good idea to boost this type of savings by increasing your percentage contributions or if possible, making lump sum contributions.
First Home Grant - If you’ve been contributing at least the minimum amount to KiwiSaver for three years or more, or an approved employer scheme, you might be eligible for a First Home Grant through Kainga Ora, typically this is $5000 per person. The amount you could receive depends on the total time you’ve been regularly paying into KiwiSaver and the type of house you are buying (pre-existing or a new build).
Family Contributions -There are several ways your parents or family can help you out. They can gift you money towards the home deposit; use their property as equity to support your loan; lend you money to buy your home; or offset your loan with their bank accounts. Some of these options are becoming less favoured by the banks so we will explain these to you.
Savings – your hard-earned savings that can be evidenced via your bank statements or investments in shares etc. While your deposit funds are building up, you’ll probably want them to earn some interest. There are various options available – from bank savings accounts and term deposits to lump sum deposits into your KiwiSaver as mentioned earlier. We recommend talking to an investment advisor to help you find the best options to meet your goals and timeframes. Keep in mind that it currently takes an average 9.6 years according to Core Logics 2023 Housing Affordability Report but that all depends on your ability to save over time.
If you are not sure if you have enough for a deposit, contact us and we can help you get the answers you need.