5% or 10% deposit? We can help with a low-deposit home loan

Every situation is unique, and by using our experience and range of banks and lenders we can tailor a solution to suit you. This includes negotiating terms on your behalf, preparing the application to get the best chance of approval and general advice through the entire home-buying process.

Generally with 90% home loans the banks need to see that you have saved a minimum 5% of the deposit (with Welcome Home/First Home Loans the whole deposit can be gifted). So keeping a good record of your savings history is a must.

If you have minimal debt and substantial income, a 95% home loan could well be achievable. We expertly tailor your application giving it the best chance of approval with the banks.

Construction loans of 90-95% may also be available depending on your income and credit assessment.

KiwiSaver is another option for raising a deposit. If you have been in the scheme for 3 years you may be able to withdraw your funds. In addition, you could be entitled to a subsidy of $1,000 per year you have been in the scheme up to $5,000. A couple, depending on incomes, could both be entitled to subsidies.

Using a Guarantor….

It's possible to use a willing parent, family member or friend as a guarantor on a low-deposit home loan. This can be used in conjunction with KiwiSaver withdrawals, gifts and savings.

Using a guarantor is a complex area and every bank is different on how they view it, so it pays to get advice from us. Normally the guarantors will need to seek legal advice.

The bank or lender will usually take a mortgage over your parent’s/guarantor’s property as well as the property you are purchasing. The guarantee is usually limited to 20% (plus interest and charges in the event of default).

The arrangement should be short term, e.g. 2-5 years, so the loan can be refinanced and the guarantee released as soon as possible.

Usually the purchaser(s) need to prove they can service the entire debt, some of it (usually 20% of the loan) may be set up on a shorter term. Some banks require the guarantor to prove they could service some of the loan (20%) and/or be a co-borrower of some of the debt.

The guarantor needs to provide some basic financial information such as a statement of position showing assets and liabilities and a credit check. They also need to prove their income. Banks will look at the suitability of a guarantor to make sure no one is being put in a financially compromising position!

There is some information that the Banking Ombudsman has put out about being a guarantor and what it means, here is the link for further information.

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