The idea that you need a 20% deposit to buy your first home is one of the most persistent myths in New Zealand real estate. It stops genuine buyers from even starting the process. The reality is more nuanced — and more encouraging.

Where the 20% Rule Comes From

The Reserve Bank of New Zealand sets loan-to-value ratio (LVR) restrictions that limit how much banks can lend at high LVRs. For residential investment properties, stricter rules apply. But for owner-occupiers — especially first home buyers — there are specific pathways that allow you to buy with as little as 5%.

The 20% threshold matters because once you’re below it, you pay a low equity margin on top of your standard interest rate. This is typically 0.25%–0.75% and drops off as you build equity above 20%. It’s a cost, but for many buyers it’s a cost worth paying to get into a property sooner.

The Kainga Ora First Home Loan

For eligible first home buyers, the Kainga Ora First Home Loan allows you to purchase with as little as a 5% deposit. The loan is provided through participating banks and credit unions, with Kainga Ora acting as guarantor on the high-LVR portion.

To qualify, income caps apply — as a guide, around $95,000 for a single buyer or $150,000 combined for two or more buyers — and you must intend to live in the property. These thresholds change from time to time, so a mortgage adviser can confirm the current limits and which lenders are participating.

KiwiSaver First Home Withdrawal

If you’ve been contributing to KiwiSaver for at least three years, you can withdraw most of your balance to put towards your first home. You withdraw all your contributions, your employer’s contributions, and investment returns — you just need to leave $1,000 in the account.

For most buyers who’ve been working and contributing since their mid-twenties, this adds up to a meaningful sum. Critically, KiwiSaver funds are treated as genuine savings by lenders, which matters for how banks assess your deposit.

Gifted Deposits from Family

Many first home buyers receive a cash gift from parents or family. Banks accept gifted deposits, but they require a signed statutory declaration from the donor confirming the funds are a genuine gift — not a loan. If it were structured as a loan, it would affect your servicing calculation.

Banks may also require that a portion of your deposit comes from your own genuine savings (money accumulated over time through regular saving), not solely from gifts.

The Honest Picture

Buying with a 5% or 10% deposit is absolutely possible for eligible first home buyers — but it comes with trade-offs. Your loan is larger, your repayments are higher, and you’ll pay a low equity margin until you cross the 20% equity threshold. If property values fall, you’re more exposed.

But for many buyers, the alternative is renting while prices continue to move. Working through the numbers with an adviser — looking at the real cost of getting in now versus waiting — is the conversation worth having.