Low Deposit Lending Options
Your Guide to Homeownership with as little as 5% Deposit
Dreaming of owning a home but worried about your savings? Don’t worry—getting into the property market with a low deposit is more achievable than you think.
For a home priced at $800,000, a 5% deposit means saving $40,000, compared to $160,000 for a 20% deposit. Many first home buyers are still making their homeownership dreams a reality, and you can too.
In this article, we’ll walk you through four options to help you own a home with as little as a 5% deposit.
1. Bank of Mum and Dad
These days, turning to the Bank of Mum and Dad is becoming a common strategy for getting into the housing market. If your parents are able and willing to help with your deposit, whether by gifting you cash or using the equity in their home, it can give you a significant boost.
Just be aware that most banks still want to see that you’ve saved at least some of the deposit yourself. If you haven’t managed to save anything, lenders might be concerned about your ability to handle mortgage repayments.
2. Low-Deposit Home Loans with Major Bank
Low-deposit home loans are one option, but there’s a catch. Banks have strict rules, known as loan-to-value ratios (LVRs), that limit how many of these loans they can hand out. These rules are set by the Reserve Bank, which means getting approved for a low-deposit loan can be a bit trickier.
If you’ve got a great financial track record, an excellent credit score, a stable job, and proof that you’re savvy with your money, you’ve got a shot. However, be prepared for extra costs. Low-deposit first home buyer loans come with higher interest rates and a low equity premium fee. Some lenders might also require you to get lender’s mortgage insurance (LMI), which protects them in case you can’t repay your loan.
Want to see a comparison between purchasing a first home with YouOwn Co-ownership vs a 95% loan with a major bank?
The answer might surprise you: co-ownership model can be more cost-effective solution!
Click here: https://youown.co.nz/news/youown-co-ownership-vs-95-home-loan-a-detailed-comparison/
3. Kāinga Ora First Home Loan
Another option is the Kāinga Ora First Home Loan which is backed by the government through Housing New Zealand. It is designed for first-time buyers and only requires a 5% deposit.
But like most good things, there are a few conditions which may not be suitable for your situation:
• Your annual income needs to be $95,000 or less if you’re buying solo, or $150,000 or less if you have dependents or are buying with a partner.
• While the house price caps had been removed, the First Home Loan income caps remained, and buying a house in either Auckland or Wellington often required a bigger income than the cap allowed.
• You’ll also need to pay a 0.5% lender’s mortgage insurance levy.
• Applicants who also want to retain more of their savings instead of putting as much as possible towards their deposit could also see themselves missing out on a First Home Loan.
4. Co-Ownership with YouOwn
Co-ownership with YouOwn is a rapidly growing alternative for first home buyers to buy their first home with a low deposit. If you’re serious about stepping onto the property ladder but find your options limited, this approach could turn your dream into a reality.
If you have a stable job, are contributing to KiwiSaver or have some savings but not enough for a full home loan, YouOwn can help you get a foot in the door.
This option allows you to purchase a portion of the property you can afford now, while YouOwn covers the rest. You’ll pay a small fee on their share, and ideally, within five years, you’ll buy us out.
Meanwhile, you’ll enjoy all the rights of homeownership, including the freedom to make changes to the property.
Here’s how it works:
• No income cap.
• YouOwn can contribute up to 15% of the deposit.
• You aim to buy out our share within five years.
• You can choose between new or existing homes.
• Available across New Zealand.
• YouOwn acts as a passive partner—we won’t interfere in your daily life.
• No set timeline for when you must buy us out.
• No minimum income requirement.
No matter your situation, there are ways to make home ownership happen, even if your deposit isn’t huge. Whether it’s tapping into government support, getting help from family, or exploring co-ownership options, there’s more than one path to getting the keys to your very own place.
If you’re interested in co-ownership with us, you probably have a few questions about the process. Check out our FAQs
Or if you want to see if your eligible or ready to apply now click here.