How much deposit do I need?

For an owner-occupied property, a 20% deposit means you are borrowing 80% of the property's value.

This is referred to as an 80% Loan-to-Value Ratio, or LVR.

For example:

Purchase priceDepositMortgageLVR$700,000$140,000$560,00080%$800,000$160,000$640,00080%$900,000$180,000$720,00080%$1,000,000$200,000$800,00080%

At an LVR of 80% or less, you will generally have access to a wider range of bank lending options and may qualify for the bank's standard or special home loan rates.

Once your borrowing exceeds 80% of the property's value, you are considered a high-LVR or low-equity borrower.

Yes.

The Reserve Bank does not require every owner-occupier to have a 20% deposit.

As at October 2026, New Zealand banks are permitted to have up to 25% of their new owner-occupier mortgage lending at LVRs above 80%.

That means banks can lend to some borrowers with deposits below 20%.

However, this is important:

The Reserve Bank rules tell banks how much high-LVR lending they can undertake. They do not require a bank to approve an individual borrower with a small deposit.

Each bank still decides which low-deposit applications it is prepared to accept based on factors such as:

• Your income

• Your employment

• Your credit history

• Your spending and financial commitments

• Your overall borrowing level

• Your ability to service the mortgage

• The property you are buying

• Where your deposit has come from

• The strength of the overall application

This is one of the areas where lender selection can become particularly important.

Take an $800,000 home as an example:

Deposit percentageDeposit requiredMortgage requiredLVR20%$160,000$640,00080%15%$120,000$680,00085%10%$80,000$720,00090%5%$40,000$760,00095%

A smaller deposit means you need to borrow more.

But there is another important difference.

Once your deposit drops below 20%, the interest rate itself may also become more expensive.

A Low Equity Margin, sometimes called a Low Equity Premium, is an additional interest rate charged by some banks when you have less than 20% equity in your property.

For example, if the bank's normal home loan rate was:

5.00% p.a.

and a low equity margin of:

0.75% p.a.

applied, your effective interest rate could become:

5.75% p.a.

The margin compensates the lender for the additional risk associated with lending a larger proportion of the property's value.

The lower your deposit, the higher that additional margin may be.

This varies considerably between lenders.

For example, Westpac currently publishes the following low-equity margins:

LVRApprox. depositWestpac Low Equity Margin*80.01%–85%15%–19.99%+0.25% p.a.85.01%–90%10%–14.99%+0.75% p.a.90.01%–95%5%–9.99%+1.50% p.a.Above 95%Less than 5%+1.75% p.a.

BNZ currently publishes slightly different premiums:

LVRApprox. depositBNZ Low Equity Premium*80.01%–85%15%–19.99%+0.35% p.a.85.01%–90%10%–14.99%+0.75% p.a.90.01%–95%5%–9.99%+1.20% p.a.Above 95%Less than 5%+1.50% p.a.

*These are examples of currently published lender margins and are not a recommendation of either lender. Banks can change their pricing and criteria at any time.

This also illustrates why simply asking:

“Which bank has the lowest mortgage rate?”

doesn't always give you the right answer.

The actual rate available to you may depend on your deposit and LVR.

Imagine you wanted to purchase an $800,000 home.

With a 20% deposit, you would contribute:

$160,000

and borrow:

$640,000

At a 19% deposit, you would contribute:

$152,000

and borrow:

$648,000

You are only $8,000 short of a 20% deposit.

But that $8,000 could potentially move you from standard-equity lending into low-equity lending.

Depending on the bank, that could mean:

• A higher mortgage interest rate

• A low equity margin or premium

• Fewer lenders willing to approve the application

• More restrictive lending criteria

• A registered valuation being required

• Reduced access to some special interest rates or promotions

So sometimes finding the final few thousand dollars to reach 20% can have a disproportionate financial benefit.

This is something worth calculating rather than simply assuming that borrowing a little more will make little difference.

Consider a borrower buying an $800,000 home with a 10% deposit.

Their mortgage would be approximately:

$720,000

Suppose the normal home loan rate was 5.00%, but because they have only 10% equity, a low equity margin of 0.75% applies.

Their mortgage rate becomes:

5.75%

On a $720,000 mortgage, that additional 0.75% represents approximately:

$5,400 of additional interest in the first year, before allowing for the declining loan balance.

That doesn't automatically mean you should wait until you have a 20% deposit.

It does mean that the additional cost should be understood before making the decision.

If waiting another year to save the extra deposit means property prices increase, rent continues to be paid and your circumstances change, purchasing earlier may still make sense.

There isn't one answer that applies to everyone.

One trap for home buyers is assuming that an advertised special fixed rate will automatically apply to them.

It may not.

Some special home loan rates require borrowers to have at least 20% equity.

Westpac, for example, states that some of its Choices fixed special rates require a minimum of 20% equity.

Other lenders may structure low-equity pricing differently.

So when comparing banks, the important question isn't simply:

“What is your one-year fixed rate?”

It is:

“What interest rate will actually apply to my loan given my deposit, LVR and circumstances?”

Not necessarily.

As you repay your mortgage, your equity should gradually increase.

Your equity can also increase if the market value of your property rises.

Once you can demonstrate that your mortgage is at or below 80% of the property's value, you may be able to ask the bank to remove the low equity margin.

The process varies between banks.

A lender may require an updated registered valuation or another acceptable assessment of the property's value.

For example, Westpac currently states that once it confirms you have at least 20% equity, the low equity margin may be removed. For fixed-rate lending, removal can occur after the fixed term ends, subject to its criteria.

This is another reason we believe mortgages should be actively reviewed rather than simply left alone for years.

Quite possibly.

Banks are typically more cautious when lending above 80% LVR because there is less of an equity buffer.

The lender may therefore require an independent registered valuation.

BNZ, for example, currently states that a valuation is a condition of its home loan where the deposit is below 20%.

The bank may have requirements around:

• Which valuation platform is used

• Who completes the valuation

• How recent the valuation is

• Whether the purchase price and valuation support the required lending

You should therefore allow for the possibility of an additional valuation cost when buying with a smaller deposit.

Potentially.

A 10% deposit means you are borrowing approximately 90% of the property's value.

For example:

$750,000 purchase price

10% deposit = $75,000

Mortgage = $675,000

LVR = 90%

Some lenders have specific low-deposit lending options. Kiwibank, for example, says that in some circumstances it may lend to eligible borrowers with a deposit of 10%, subject to its lending criteria and LVR restrictions.

The strength of the overall application becomes increasingly important as the deposit becomes smaller.

There are circumstances where buying with approximately a 5% deposit may be possible.

One potential option for eligible first-home buyers is a Kāinga Ora First Home Loan.

Importantly, Kāinga Ora First Home Loans are exempt from the Reserve Bank's normal LVR restrictions.

Eligibility conditions and lender requirements apply, so not every first-home buyer will qualify.

A 5% deposit also means there is very little initial equity in the property, so it is especially important to understand the financial implications.

Your deposit does not necessarily have to consist entirely of cash savings.

Depending on your circumstances, it may include:

• Your own savings

• KiwiSaver first-home withdrawal

• Sale proceeds from another property

• A gift from parents or family

• An inheritance

• Equity in another property

• Approved family assistance

• Certain shared ownership arrangements

Banks will normally want clear evidence showing where the deposit has come from.

Borrowed deposits can be treated differently from genuine savings or gifts because the additional debt may affect both affordability and the lender's credit assessment.

Not necessarily.

Having enough money for a 20% deposit doesn't automatically mean you should put every available dollar into the property.

Home ownership comes with other expenses.

You may need money for:

• Solicitor's fees

• Building inspections

• LIM reports

• Registered valuations

• Moving costs

• Rates

• Insurance

• Immediate maintenance

• Furniture or appliances

• An emergency cash reserve

There can be a balance between achieving a lower LVR and retaining enough cash to avoid becoming financially stretched after settlement.

For example, putting every dollar into the deposit to move from 81% LVR to 80% might improve your lending terms substantially.

Moving from 75% to 73%, however, may make very little difference to your interest rate.

This is why we look at deposit strategy, rather than simply asking how much money you have available.

Family assistance is increasingly common.

There are several possible ways parents can help, including:

• Gifting money towards the deposit

• Lending money

• Providing additional property security

• Acting as guarantors in limited circumstances

• Other family-supported ownership structures

These options are not all treated the same way by banks.

There can also be important legal and financial consequences for both generations.

Before arranging family assistance, it is worth understanding exactly how the lender will treat it and obtaining independent legal advice where appropriate.

Not necessarily.

There is clearly a financial benefit to having a larger deposit.

A 20% deposit can potentially give you:

• More choice of lenders

• Access to better interest rates

• No low equity margin

• A smaller mortgage

• Lower repayments

• Greater protection if property values fall

• More flexibility when refinancing later

But waiting also has consequences.

While you save, you may continue paying rent and property prices may move.

Your personal circumstances, income, interest rates and lending rules may also change.

The right question is therefore not simply:

“Should I wait until I have 20%?”

It is:

“What are the financial consequences of buying now compared with waiting?”

That is a calculation we can help you work through.

We regularly see buyers focus almost entirely on the maximum amount a bank will lend them.

We think there is a better starting point.

Before deciding how much to borrow, consider:

How much should I borrow?

How much of my savings should I use?

What cash should I retain?

Can I reach the next LVR threshold?

What interest rate will actually apply at my LVR?

Would another lender treat my deposit differently?

Those questions can sometimes save considerably more money than simply chasing the lowest advertised mortgage rate.

If you are considering purchasing a home with a deposit anywhere between 5% and 20%, it is particularly useful to get advice before making an offer.

We can help you understand:

• How much you may be able to borrow

• Which lenders may consider your application

• Whether your deposit is sufficient

• Whether reaching 20% would materially improve the outcome

• What low-equity pricing could apply

• The likely mortgage repayments

• Whether you should retain some of your savings

• What documentation the bank is likely to require

Sometimes the difference between having a 10%, 15%, 19% or 20% deposit is much greater than the numbers initially suggest.

Expert advice. Personal guidance. Better financial outcomes.

My Money, the coach in your corner.

Book a free, no-obligation meeting with Stephen and let's work out the right deposit and lending strategy for you.

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This information is general in nature and does not constitute personalised financial advice. Bank lending criteria, LVR restrictions, interest rates and low equity margins can change. Your individual circumstances should be assessed before making a borrowing or property purchase decision