Getting your deposit together

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Gather up your acorns

Basically, banks won't lend the whole amount for a house - you need to be able to put down a deposit, and the more the better. Ideally 20% of the house value, because banks don't generally like to lend more than 80%, so you've got to cough up a bit of cash. This will also work better for you because you'll be able to access the more competitive interest rates.

Don't despair though, if you don't have an odd $150k in your back pocket (who does?) there are a few ways to reach the amount you need. Because here's the thing: the banks want you to demonstrate that you've saved 5% on your own, and that includes your KiwiSaver. As long as 5% is saved, they don't really care where the rest comes from. 

On another positive note, in January 2018 the RBNZ (Reserve Bank of New Zealand) loosened up their rules about lending to people with less than 20%. You can find out more about that here.

KiwiSaver

If you're a first home buyer you can withdraw KiwiSaver contributions made by you and your employer to use as a deposit towards your new home if you meet these conditions:

  • have been a KiwiSaver scheme member for at least three years;
  • be planning to live in the house for at least six months, and
  • be buying your first home.

HomeStart Grant

In addition to KiwiSaver, if you earn less than $130,000 and are buying for less than $600,000 (or building new under $650,000) in Auckland, you may be eligible for a HomeStart Grant of up to $5,000 per borrower.

You can find out more about these options in our First Home Buyers Guide (aka your new bible).

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The Bank of mum and dad

The easiest and cheapest way to buy is using your parents to guarantee that part of your 20% deposit you don’t have.

Their guaranteed portion will be secured over their property or it can be secured over a term deposit, so you're not asking them to fork out cash, it's more like putting a 'hold' on their existing equity until you've paid that portion back.

In the event they use a term deposit as security, the term deposit stays in your parent’s name and they continue to earn interest on it. Guaranteed home loans are treated the same as loans under 80% so you get great interest rates, there are no fees, and you’ll even get a cash contribution from the bank. On an average loan size of $400,000 you will save around $10,000 using this option. Using a guarantor makes strong financial sense, even if you can go it alone.

Eligibility for acting as a guarantor

Your parents need to be in a stable financial situation and still working (so ideally not retired on a sailboat, spending your inheritance). 

If they want to know more about what they're signing up to and any potential risks, we're happy to chat! Just call us on 0800 21 22 30.

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