Do You Really Need to Have a 20% Deposit to Buy a Home
Many aspiring homeowners believe that in order to buy a home, they need to have a deposit of at least 20% of the property's value. What a lot of people don't realise is that the banks are able to lend 10% of their new lending for low deposit home purchases. Although it is a small portion of their total lending, it does enable the banks to lend to borrowers with low deposits.
Bank policies are generally more restrictive in the low deposit space, and the finance is generally more expensive (than for those with a 20% deposit), but many aspiring homeowners are willing to accept those conditions if it leads to them being able to buy a home for themselves.
Considering building? Banks don’t have the same restrictions when it comes to new builds (subject to certain conditions). This essentially means that new builds might be a better option for some low deposit buyers. Buyers will need to know the rules before going too far down that track, and we would be happy to discuss these options.
Every bank has different criteria for low deposit loans, and it can be a time consuming and confusing experience for anyone unfamiliar with the territory. Contacting a specialist Mortgage Adviser who has experience with such matters can be the quickest and simplest way of determining the low deposit options.
There are also some other options that aspiring homeowners are often unaware of, that could increase their total deposit amount to the more widely accepted level (20% of the purchase price).
If you’re a first home buyer you may be able to withdraw funds from your KiwiSaver account to assist with your deposit. You might also be eligible for a HomeStart Grant, which can provide an extra deposit boost. If you’d like to know more about either of these options, click here.
It’s also possible for others, such as parents, to provide deposit support. There are a number of different ways assistance can be provided (such as gifts, loans and guarantees), and it is, in my view, very important to determine the most appropriate option for the parties' circumstances. To find out more about the possible deposit support options, click here.
To those considering buying a property, I would recommend that you get in touch with a recommended Mortgage Adviser well before you are ready to set foot in the market. Even if you don’t think you’ll be able to buy just yet a conversation with a Mortgage Adviser will help you determine how close you are to being able to buy, and the steps that you might need to take to achieve your goal.
If you, or anyone you know is considering purchasing a property, we would love to have a chat and see how we can help.