Buying your first home with only 5% deposit

The Wellington Region has seen significant growth in house prices over the last five years. Whilst this growth has been great news for those already on the property ladder, the first home dream has started to feel increasingly distant for young buyers.

This week we look at the changes announced by the government that aim to give confidence back to these buyers.

Why the changes

The major issue for first home buyers in Wellington has been trying to get in the sweet 20% deposit space where banks love to lend. Buying with this level of equity means better loan rates as well as a few bonuses on the side such as cash contributions. In 2016, an average 20% deposit for a 3/4 bedroom home in the region was $98,430, today it’s $134,610.

Whilst house prices have grown significantly in this period, the cost of servicing a mortgage has not. With record low interest rates being offered for significant fixed periods, both banks and the government are aware that many buyers have the capacity to service a home loan but are being locked out due to being unable to get a 20% deposit. That’s where the 5% deposit changes come in to play.

How can I access 5% lending?

The changes announced by the government relate to the First Home Loan (previously Welcome Home Loan). To access the FHL there are a few important criteria:

  • Firstly there is an income cap applicable - $85,000 before tax for one person or $130,000 combined for two.
  • Secondly, the FHL is only available for properties with a value up to $550,000 in the Wellington region.
  • The third criteria is that it must be the first home for all of those purchasing the property.

If you fit in this criteria, 5% lending should be open to you – allowing you to purchase a $550,000 property with only $27,500 in the bank. You could also potentially access up to $5,000 as an individual or $10,000 as a couple from the First Home Grant reducing this amount even further.

What if $550,000 isn’t enough?

The good news is many New Zealand banks are working through offering lending options as low as 5% deposit to both properties and buyers that do not qualify for the FHL. We expect by the end of the year many of these offerings to be available to the market.

In addition, there are several non-bank lenders (such as building societies and credit unions) who have lent and continue to lend to this market, many people are simply unaware as they tend to lack the large marketing budgets of the major banks!

We can sort out your first home

Our team at FoxPlan Mortgages are all across the 5% deposit changes and more than happy to have a chat with you about getting your (or your kids) first home sorted. Shoot an email to and we will be in touch.

The views and opinions expressed in this newsletter are not intended to be a personalised service for an individual retail client. The views and opinions are general in nature, may not be relevant to an individual's circumstances, and constitute class service only. Before making any investment, insurance or other financial decisions, you should consult a professional financial adviser of FoxPlan Limited.
A disclosure statement is available on request, and free of charge.

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