Minimum Deposit Requirements for Different Lenders
Navigating the property market can be challenging, especially when it comes to understanding the deposit requirements for securing a home loan. The minimum deposit needed can vary significantly depending on the lender and the type of loan. Here’s a detailed guide to help you understand the current deposit requirements from various lenders and schemes available.
Standard Deposit Requirements
Traditionally, most lenders require a minimum deposit of 20% of the property’s purchase price. This is largely influenced by Loan-to-Value Ratio (LVR) restrictions set by the Reserve Bank, which aim to ensure financial stability within the housing market. For instance, if you’re purchasing a home valued at $600,000, you would typically need a deposit of $120,000 to meet the standard requirements.
Low Deposit Options
Despite the standard 20% deposit requirement, there are several options available for those who may not have this amount saved. These options often involve additional criteria and may come with higher costs, but they provide pathways to homeownership for many first-time buyers.
1. Kāinga Ora First Home Loan
The Kāinga Ora First Home Loan is designed to help first-time buyers enter the property market with a deposit as low as 5%. To qualify, applicants must meet specific criteria, including income limits and property value caps. The scheme is underwritten by Kāinga Ora, allowing participating lenders to offer loans outside their usual lending standards. However, borrowers must pay a Lender’s Mortgage Insurance (LMI) premium, which is typically 1% of the loan amount.
2. Kiwibank Low Deposit Options
Kiwibank offers loans with deposits as low as 10%, particularly for new builds or recently constructed homes. This option is subject to LVR restrictions and may require additional scrutiny of the borrower’s financial situation. Kiwibank also collaborates with Kāinga Ora to provide pathways for first home buyers with smaller deposits.
3. Westpac Shared Ownership Programme
Westpac provides a shared ownership programme that allows buyers to purchase a home with just a 5% deposit. This programme involves co-owning the property with a participating organisation, which can help reduce the initial deposit burden.
Using KiwiSaver for Your Deposit
KiwiSaver is a valuable tool for first-time home buyers, allowing you to withdraw your savings to help meet your deposit requirements. To be eligible, you must have been a KiwiSaver member for at least three years and intend to live in the property as your primary residence. This option can significantly reduce the time needed to save for a deposit, making homeownership more accessible.
Considerations for Property Investors
For property investors, the deposit requirements are typically higher. Most lenders require a minimum deposit of 35% for investment properties, unless the property meets certain exemption criteria. This higher threshold reflects the increased risk associated with investment properties compared to owner-occupied homes.
Understanding the minimum deposit requirements is crucial for anyone looking to enter the property market. While the standard deposit is 20%, various schemes and options are available to help those with smaller deposits achieve homeownership. Whether through Kāinga Ora’s First Home Loan, leveraging KiwiSaver savings, or exploring shared ownership programmes, there are multiple pathways to consider. It’s important to assess each option carefully, considering the long-term financial implications and consulting with financial advisors or mortgage specialists to find the best fit for your circumstances.