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How much deposit do first home buyers really need in New Zealand?

  • Writer: Shane Passfield-Bagley
    Shane Passfield-Bagley
  • Dec 1
  • 5 min read

What does “deposit” mean for a first home buyer?


When you buy with a mortgage, your deposit is the part of the purchase price that comes from you rather than the bank.

  • House price: $700,000

  • Your deposit: $70,000

  • Bank lends: $630,000


Your loan to value ratio (LVR) is the loan divided by the value of the property.


In this example:

  • $630,000 ÷ $700,000 = 90% LVR

  • Which means you have a 10% deposit


In New Zealand, the Reserve Bank uses LVR rules to limit how much low deposit lending banks can do across their book, for both owner occupiers and investors.


So when a bank tells you that a 20% deposit is “standard”, it is not just a preference. It is tied into the way the entire system manages risk.

 


What is the “usual” deposit for first home buyers now?


For an owner occupier buying a home to live in:

  • The standard bank setting is still to base things around a 20% deposit (80% LVR or lower)

  • Loans with less than 20% deposit are classed as “high LVR” and can only make up a limited share of each bank’s new lending to owner occupiers


From 1 December 2025, the Reserve Bank allows banks to do up to 25% of new owner occupier lending to borrowers with less than 20% deposit, up from 20%.


In practice, that means:

  • Many first home buyers still aim for 20%, because it opens up the most options and usually sharper pricing

  • A good chunk buy with 10% to 19% deposit, using this “high LVR” quota

  • A smaller group buy with 5% deposit, usually through Kāinga Ora First Home Loan or very specific bank products


Buying with less than 10% deposit is rare and usually only possible where there is a strong combination of family support, new build exemptions, or non-bank lending. Even then, it carries more risk and will not be suitable for everyone.

 


What changed with the First Home Grant?


You will still see a lot of older content talking about the First Home Grant as part of the deposit mix.


The key point now is simple:

The First Home Grant finished in May 2024 and no new applications can be made.


If you applied before the scheme closed, your application may still be processed.


For everyone else, the focus has shifted to:

  • KiwiSaver first home withdrawal

  • Kāinga Ora First Home Loan

  • Shared ownership or other bank specific schemes


So when you plan your deposit today, you should not rely on the First Home Grant being available.

 


Where can a first home deposit actually come from?


Most first home buyers combine several sources.


Savings

Regular savings in a bank account or term deposit still form the backbone for many people.


Lenders often like to see “genuine savings” over time, not just a lump sum that appeared last week, because it tells them something about your money habits.


KiwiSaver first home withdrawal

If you have been a member of KiwiSaver for at least three years, you can usually withdraw most or all of your balance to help with your first home, provided it is an owner occupied property.


In broad terms:

  • You can withdraw your contributions, your employer’s contributions, government contributions, and investment returns

  • You must leave at least $1,000 in the account, if you were provided this when you opened your account

  • You must intend to live in the property for at least 6 months


Some people now treat KiwiSaver as their primary deposit engine, topping it up with extra voluntary contributions while renting. Banks will also often treat KiwiSaver as genuine savings, making it easier to meet their requirements.


Kāinga Ora First Home Loan

The First Home Loan, supported by Kāinga Ora and delivered through selected banks and lenders, is designed for people who can afford repayments but are struggling with the deposit.


It allows:

  • A minimum 5% deposit, instead of the more typical 20%

  • Subject to income caps, regional house price caps, and the participating lender’s normal credit criteria


This can combine with KiwiSaver withdrawal and savings to get you over the line sooner.


Gifts and family support

Family support is very common in practice.


This might be:

  • A non-repayable gift for part of your deposit

  • A loan from family, sometimes subordinated to the bank

  • A guarantee or security over a family home, which can boost your effective deposit


Each bank treats these differently, and they can have implications for all parties. The structure matters just as much as the amount.



New builds and exemptions


New builds have long had more flexible treatment under LVR rules. They can be exempt from the standard LVR “speed limits”, which makes it easier for banks to lend at higher LVRs on these properties.


In practice, this often means:

  • Some banks will consider lending with 5-10% deposit on certain new build projects for strong first home buyers

  • The exact rules are product and bank specific


Again, the detail really matters, so this is an area where tailored advice pays off.

 


How do DTI rules affect first home deposits?


From 1 July 2024, banks must also follow debt to income (DTI) restrictions. These limit how much lending can go to borrowers whose total debt is high relative to their gross income.


Current settings allow banks to make:

  • Up to 20% of new owner occupier lending to borrowers with a DTI of more than 6 times their gross income

  • Up to 20% of new investor lending to borrowers with a DTI of more than 7 times their gross income


For you as a first home buyer, this means:

  • Your income and existing debts can cap your buying power even if your deposit looks strong

  • Banks will test your application against both LVR and DTI limits, alongside their normal servicing tests


So a big deposit is helpful, but it is not the only factor.

 


What does a realistic path look like?


A typical first home path might look like:

  1. Get a clear picture

    • Tally your current savings, KiwiSaver balance, and any potential family support

    • Get a sense of likely house prices in your target area

  2. Work out your rough deposit band

    • 20% and above

    • 10 to 19%

    • 5 to 9%

    • Each band points you towards different products and lenders

  3. Tidy up consumer debt

    • Credit cards, “buy-now, pay-later”, and personal loans impact your DTI and servicing

    • Reducing or closing these can make a bigger difference than you expect

  4. Check KiwiSaver and Kāinga Ora options

    • Confirm eligibility and any limits

    • Understand timing, especially for KiwiSaver withdrawals ensure you are in the most appropriate fund type for your expected withdrawal timeframe

  5. Get a pre-approval

    • A good adviser can help you compare multiple banks and products

    • Your pre-approval will reflect both deposit and income constraints

  6. Choose the right strategy for your stage of life

    • Sometimes a slightly smaller first step (for example townhouse rather than standalone) can reduce the deposit and DTI pressure

    • Other times, it may be worth waiting to strengthen your position

You do not need to have all of this figured out on your own. The key is to understand that you have more levers than just “save harder”.

 

Thinking about your first home? If you would like help working out your deposit, KiwiSaver options, and what the banks might lend, reach out and we can put a clear first home plan in place.

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