If you think you need a full 20% deposit to buy a house in New Zealand in 2025, think again. The market and lending rules have evolved, offering new opportunities for buyers with smaller deposits. Let’s break down the options, rules, and strategies you can use to get on the property ladder sooner.
Understanding the 20% Deposit Rule in 2025
Traditionally, banks preferred buyers to have at least a 20% deposit to reduce their lending risk. However, in 2025, due to updated Reserve Bank policies and ongoing housing affordability challenges, there are more pathways available for those with smaller deposits, particularly first-home buyers.
Key update: As of May 2025, banks are allowed to lend more than 20% of their residential mortgage lending to borrowers with deposits under 20%, especially if you meet certain criteria.
Low Deposit Lending Options in 2025
Here are the main options available:
| Option | Key Details | Pros | Cons |
|---|---|---|---|
| Low Deposit Home Loans | Some banks offer loans with as little as 5-10% deposit. | Faster access to the property market. | Higher interest rates and/or fees. |
| First Home Loan Scheme | Supported by Kāinga Ora, requiring only a 5% deposit. | Government-backed, lower barrier to entry. | Income and house price caps apply. |
| Family Guarantee or Gifting | Family members help by gifting funds or acting as guarantors. | Bypass strict deposit requirements. | Family relationships may complicate agreements. |
| Build-to-Rent or Rent-to-Own | Emerging alternative ownership models. | Entry without traditional deposit savings. | May have limited availability and complex contracts. |
First Home Loan Scheme: A Practical Gateway
In 2025, the First Home Loan Scheme remains a strong solution for low-deposit buyers. Managed through selected lenders and backed by Kāinga Ora, it requires only a 5% deposit.
Eligibility Criteria:
- Income cap: $110,000 for individuals, $170,000 for two or more buyers.
- House price cap: Up to $725,000 in Auckland, different in other regions.
- Must be a New Zealand citizen or permanent resident.
- First-home buyer or someone in a “similar financial position.”
Applications require careful documentation but offer a vital lifeline for those struggling to save a large deposit.
Bank Policies: Flexibility With Strings Attached
Major banks like ANZ, ASB, BNZ, and Westpac are willing to lend to buyers with less than 20% deposits but often attach additional requirements:
- Higher Interest Rates: LVR (Loan-to-Value Ratio) margin added.
- Lender’s Mortgage Insurance (LMI): Extra cost to protect the bank.
- Stricter Credit Checks: Solid credit history is crucial.
Having strong income stability and low existing debt helps when applying under these conditions.
Alternative Pathways in 2025
With rising house prices and tougher competition, more buyers are exploring creative solutions:
- Shared Ownership: Partnering with housing organisations like YouOwn or Housing Foundation.
- Progressive Home Ownership: Gradually buying a greater share of your home.
- Co-buying: Pooling resources with friends or family to purchase jointly.
These alternatives come with their own complexities but can make the dream of home ownership achievable.
What You Need to Know About New Builds
Buying a new build can sometimes exempt you from tougher deposit restrictions. As of 2025, most banks are more lenient towards funding new construction projects, considering them lower-risk for property value declines.
New builds often require just a 10% deposit and sometimes qualify under different LVR limits.
Key Tips for Buying With Less Than 20% Deposit
- Improve Your Credit Score: Pay down debts and avoid late payments.
- Show Strong Income Stability: Employment history matters.
- Budget for Extra Costs: Higher mortgage repayments, LMI fees, and maintenance.
- Get Pre-Approval Early: Understand exactly how much you can borrow.
- Use KiwiSaver Wisely: Tap into your retirement savings for a home deposit.
Conclusion
Yes, in May 2025, you can absolutely buy a house in New Zealand without a 20% deposit. While it may require additional planning, alternative strategies, or accepting slightly higher costs, low-deposit home ownership remains very much alive. By understanding your options, working with reputable lenders, and being prepared for a more competitive process, getting into your first home is still achievable.
FAQ
How much deposit do I need to buy a house in NZ in 2025?
You can buy with as little as 5% through the First Home Loan Scheme or 10-15% with regular bank loans, depending on the lender and your financial situation.
Is it harder to get a mortgage with less than 20% deposit in NZ?
Yes, it’s more competitive. You may face stricter credit checks, higher interest rates, and additional insurance costs, but it’s definitely still possible.
What is LVR and why does it matter?
LVR stands for Loan-to-Value Ratio. It measures the loan amount against the home’s value. A high LVR (over 80%) means more risk for lenders, leading to stricter lending conditions.
Can KiwiSaver funds be used for a house deposit in 2025?
Yes, you can use your KiwiSaver savings to contribute to your deposit if you meet withdrawal criteria, which include being a first-home buyer or meeting the “similar financial position” standard.
Does buying a new build make it easier with a small deposit?
Yes, banks often offer better terms and lower deposit requirements (around 10%) for new builds because they are considered lower-risk investments.
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