Is this Possible to Buy a House Without Savings?

20 April 2022

How much deposit do you need as a first home buyer? This really depends on what your budget is for buying a house in New Zealand. For example, your first home deposit may be less if you are buying a house in Christchurch instead of Auckland.


The process of buying a house will usually begin with you needing to organise your finance and working out what you can afford for your first home. You can begin by contacting your bank or a mortgage adviser so you can have an indication of your budget. A mortgage adviser is paid a commission by the bank and deals with multiple banks on a regular basis.


The majority of first home buyers will take out a mortgage to buy a house in New Zealand. If you are taking out a mortgage with the main bank, they require you to have security (i.e. your own savings/deposit and permanent employment) in order for them to give you a loan. The bank will take the property as security for the loan.


Most main banks require a 20% Loan to Value Ratio (LVR) for your main home. This means if you were to take out a $600,000 loan the bank would require a deposit for a first home buyer of $120,000.


Let’s be clear a deposit does not have to be your own savings either, depending on your circumstances you could buy your first home with no deposit at all. Your first home buyer deposit could be made up of the following your savings, your inheritance, a family loan, a gift, cash, your KiwiSaver, and the Kainga Ora Home Start Grant.


The property prices in New Zealand have skyrocketed over the past two years, making it extremely difficult for first home buyers to get a deposit together to obtain a loan. In addition to the recent changes to the new lending rules in New Zealand, this has made it more challenging for the majority of purchasers to obtain a home loan.


These new lending rules are regulated under the Credit Contracts and Consumer Finance Act (CCCFA). These changes require buyers to still have a deposit, which is now significantly higher due to the significant increase in property prices over the past two years.


In addition, the new lending rules require the buyer to have a significantly higher surplus income after expenses. Some of the main banks are allowing some first home buyers to have a minimum LVR of 10%, however, they require your monthly income after expenses to be significantly higher. This makes it challenging for first home buyers to obtain finance.


If you’re in a situation where you have the serviceability but require more security, you could potentially look at loaning monies from a family member or restructuring assets so you then have the security. This means you could purchase a home and not actually have a deposit saved, rather it could be loaned. Then in time you could then look at refinancing and repay the deposit loan with the equity you have gained in the property and any savings. 


You can consider it from the perspective that the monies you were paying on rent and are now going towards your mortgage and home expenses and the monies that you were using to save for a deposit can go towards the repayment of the loan on the deposit. The first thing you should do is contact your bank or preferably a mortgage broker and get them to evaluate your financial situation.


It is potentially possible to buy a house in New Zealand with no deposit at all, however, everyone’s circumstances are unique and require expert advice from a property and trust lawyer and independent financial advice. Please feel free to contact our team for any enquiries in relation to buying your first home, restructuring your assets and succession planning needs.

A model house sitting on top of a wooden table next to stacks of coins.

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Buying a property is one of the most significant financial decisions you'll make in your lifetime. Whether you're a first home buyer in Christchurch or an experienced investor, understanding the conveyancing process is crucial for protecting your interests and ensuring a smooth transaction. Weston Ward and Lascelles’ Christchurch property lawyers have guided countless clients through the complexities of buying and selling property, but one area of the process is typically misunderstood by clients, and that is what happens to your deposit when you are buying a property. It’s an important aspect of property conveyancing, so this article is to fill in any gaps and help you navigate this element of the transaction. Understanding property deposits in New Zealand A deposit is an initial payment made by the buyer to the seller and represents a proportion of the total of the purchase price. The deposit is usually payable on the purchaser confirming that all conditions inserted in the contract for the benefit of the purchaser have been satisfied i.e. the deposit is usually payable when the contract goes unconditional. But note auctions are different. If you have bought a property at auction the deposit must be paid immediately upon winning the auction, as typically auctions are unconditional on the fall of the hammer. If you do not pay the deposit immediately after winning an auction, the vendor would immediately be entitled to cancel. But if you did not pay the deposit on a property (not purchased at auction) immediately after you confirmed that all conditions inserted in the contract for your benefit have been satisfied, this would not usually entitle the vendor to immediately cancel the contract. The vendor would first have to serve notice on you requiring you to pay the deposit within 3 working days or else! A deposit serves as assurance for the vendor that the purchaser is serious about completing the transaction and offers financial protection to the vendor if the buyer defaults. For purchasers, it demonstrates good faith and secures their right to complete the property purchase under the agreed terms of the Sale and Purchase Agreement. 
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