Why deposits matter: equity and LVR
Your deposit is your stake in the property; the loan covers the rest. Lenders think about this in terms of the loan-to-value ratio, or LVR: the loan amount divided by the property’s value. Borrow $400 of every $500 of value and your LVR is 80%; the other 20% is your equity.
The bigger your deposit, the lower your LVR, and the less risk the lender carries if values fall or the loan runs into trouble. That’s why a larger deposit generally means an easier approval, more lenders willing to compete for your business, and better pricing. It also gives you a buffer of your own: equity from day one that isn’t hostage to the market’s next move.
It differs by property type
Lenders don’t treat every purchase the same. The deposit they expect depends on the property itself and how you’ll use it, and a home you’ll live in generally gets the friendliest treatment of all.
The specific thresholds are shaped by Reserve Bank lending restrictions and by each lender’s own appetite, and both change over time. So treat any percentage you’ve heard at a barbecue as a starting point, not a rule. Part of our job is knowing where every lender on our panel actually sits this month, not where they sat when your friend bought.
Where deposits come from
Savings
The most straightforward source. Beyond the dollars themselves, a track record of regular saving tells a lender something useful about how you’ll handle repayments, so consistent contributions in the months before you apply help your case as well as your balance.
KiwiSaver first-home withdrawal
If you’ve been a KiwiSaver member for at least three years, you may be able to withdraw most of your balance to put towards your first home. The withdrawal is made through your KiwiSaver provider and takes time to process, so it pays to start the paperwork well before you need the money at settlement. We’ll walk you through whether you qualify and how the timing fits alongside your offer.
Gifts from family
Family help is common, and lenders are comfortable with it provided the mechanics are clean. The lender will usually want a signed gifting declaration confirming the money is a genuine gift that doesn’t have to be repaid. If it’s actually a loan from family, that’s fine too, but it must be declared as one: repayments to family count against your ability to service the mortgage, so the two are assessed quite differently.
Equity in an existing property
If you (or a family member willing to help) already own property, the equity in it can do the work of a cash deposit. The lender takes security over both properties, or an existing loan is topped up to release funds. It’s a common way for parents to help children into a first home without handing over cash. It’s powerful, but it ties the properties together. That’s worth structuring carefully, and something we talk through in detail.
What “low-deposit” lending really means
Some lenders will lend to borrowers with smaller deposits. That’s what low-deposit (or low-equity) lending is. It’s a genuine path into a home, but it comes with trade-offs worth understanding before you take it:
- Fewer lenders to choose from. Not every lender plays in this space, and those that do have limited room, so your options narrow.
- A higher cost while your equity is low. Lenders typically charge more for low-equity lending, through a margin on the rate or a fee. That extra cost usually falls away once your equity crosses the lender’s threshold.
- Closer scrutiny. Expect a more detailed look at your income, spending and account conduct, and possibly a registered valuation of the property.
None of that makes low-deposit lending a bad idea. For many buyers it’s a sensible bridge: get into the home now, let repayments and time rebuild your equity, then revisit the loan once you’re past the threshold. The key is going in with a plan, not by accident.
Getting a real answer
Because the answer depends on the lender, the property and your circumstances, the useful next step isn’t more reading. It’s a short conversation. We’ll look at your deposit sources together, tell you where you stand across 14+ banks and non-bank lenders, and map the path to pre-approval. Start with our pre-approval guide, the first home buyers page, or the repayment calculator.