Breaking the 20% Deposit Myth

Tired of the endless saving cycle while watching home prices continue to climb? You're not alone. Many Kiwis believe they need a 20% deposit to enter the property market—a seemingly impossible hurdle that keeps pushing the dream of home ownership further away. But what if I told you this widely accepted "truth" is actually one of the biggest myths in New Zealand real estate?

As a mortgage advisor who's helped hundreds of families secure their first homes, I'm pulling back the curtain on low deposit options that could transform your housing journey. The reality is far more promising than most realise—with pathways to property ownership requiring as little as 5-10% deposit. From Kāinga Ora's First Home Loan scheme for those with just 5% saved to mainstream banks that will consider 10% deposits, and even non-bank lenders offering flexibility on credit history and income types, the opportunities extend well beyond what most buyers imagine.

Through real client stories, including a single mother who went from an 8% deposit to homeowner in Levin (later refinancing with a mainstream bank), I break down exactly how these alternatives work, who qualifies, and what you need to prepare. Yes, buying with a lower deposit comes with considerations like higher repayments and certain fees—but weighed against the wealth-building potential of property ownership versus continued renting, many find it's a risk worth taking. Whether you're considering your first home purchase or know someone who believes they're locked out of the market, this episode provides the strategies, tips, and encouragement needed to move forward with confidence. Ready to stop letting the 20% myth hold you back? Let's explore what's truly possible for your situation.

Chapters

• 0:00 Busting the 20% Deposit Myth
• 1:14 Understanding Low Deposit Options
• 3:04 Navigating Lender Requirements
• 4:07 Real Client Success Story
• 4:45 Practical Tips and Final Thoughts

Transcript

Speaker 1: 0:10

Kia ora, and welcome to another episode of that Home Loan Hub. I'm Zibunisa Alimova, mortgage advisor, mom of four and someone who's walked the home ownership journey with hundreds of Kiwis, just like you. Today I want to bust a myth that holds so many people back I need 20% deposit to buy a home, not true? Let's talk about low deposit home loans, what your real options are are and how to make them work for you. What is a low deposit loan? A low deposit loan means you're buying a home with less than 20% deposit. Traditionally, banks wanted buyers to have 20% saved. That's $120,000 for a $600,000 home, which can feel impossible for many first-home buyers. But in New Zealand there are actually pathways to buy with as little as 5% to 10% deposit.

Speaker 1: 1:04

Let me break it down to you how Kayanga Ora's first home loan scheme. If you've never heard of it, tune in closely. Kayanga Ora offers something called a first home loan, where pre-approved lenders allow you to buy with just 5% deposit. The catch there are income caps and sometimes property value caps, and you must meet certain eligibility criteria. So, as of now, your household income must be under $150,000 combined, or $90,000 for an individual. You must live in a home, so no rentals and you can't already own a property If you qualify. This is a fantastic starting point and I help clients access this all the time.

Speaker 1: 1:51

Banks that loan with less than 20% deposit. Now, many major banks will still consider applications with 10% deposit, but there are a few things to know. You will likely need to pay lender mortgage insurance, so low equity premium Interest rates might be slightly higher. The banks will look harder at your income, debts and spending habits so it's doable, but you'll need a clean. Harder at your income, debts and spending habits so it's doable, but you'll need a clean, strong application. This is where having a mortgage advisor really helps, and there is one, currently a major bank that offers a loan with as little as 5% deposit.

Speaker 1: 2:28

Now, non-bank and second-tier lenders If you don't qualify through Kyanga, aura or the bank says no, there is still hope. Non-bank lenders, also known as second-tier lenders, are more flexible on things like credit history, income type and deposit size. Yes, interest rates can be higher, but often this is a short-term strategy to get you into the market. You can refinance later, once you've built some equity. And what's the catch? You'd say. So let's be honest Buying with a low deposit has some risks Higher repayments due to a bigger mortgage, less buffer if the market dips and you have to sell Extra fees or premiums or margins. But the upside you get into the market sooner you stop paying rent and you start building wealth through home ownership.

Speaker 1: 3:16

The key is being financially prepared and having a clear plan. I've got a case study for you here. Let's have a look at a client's story from 8% deposit to a first home. I had a single mom come to me with an 8% deposit. The banks went interested. She had a good job but didn't like her short work history. We worked with a non-bank lender, tidied up her budget and within three months she was holding the keys to her own home in Levin. Six months later we managed to refinance her with a mainstream bank at a better rate. And that's the kind of journey a low deposit can start if you know your options.

Speaker 1: 3:55

So I've got some tips for you as well today. Tips for making it work. Start budgeting early. Banks love to see consistent saving. Clean up your credit. Even small defaults can affect approvals. Talk to an advisor early, even if you think you're not ready especially if you think you're not ready. And then consider location flexibly. Look beyond your dream suburb to get started, because remember, your first home is not your forever home. And my final thoughts for you today don't let the 20% deposit myth hold you back. Yes, it's ideal, but it's not the only way. With good advice, realistic planning and the right lender, you can buy with less, and I'd love to help you figure out what's possible for your situation. That's all for today on that Home Loan Hub. If you found this episode helpful, share it with a friend, leave a review or reach out for a chat. I'm always here to support your home ownership journey. Until next time, stay hopeful, stay prepared and don't stop dreaming.