The first step of securing a property is to sort out the home loan deposit, but for most borrowers, thinking about the amount of money can send shivers up your spine. Don’t be stressed – there are a couple of ways to source your deposit.

In this article, we take a brief look at different types of home loan deposits that are commonly accepted by lenders in New Zealand.

Apart from savings made from your regular income, what are the other ways to source a deposit that can be used for buying a property? What proof of deposit is acceptable to use for a mortgage?

Mortgage deposit source for buying a house in New Zealand

Video Timeline

1. The deposit that you’ve already made - 00:33

2. Frist Home Start Grant and KiwiSaver withdrawal - 01:00

3. Personal savings - 01:38

4. Gifted deposits - 02:22

5. Inheritance - 02:55

6. Borrowed money from close relatives - 03:08

7. Deposit from selling assets - 03:50

8. Using existing security equity as deposit - 04:24

1. The deposit that you’ve already made

When you purchase a property, either by winning the auction, or by a successful negotiation, you are generally required to pay 5% - 10% of the total sales price as the deposit immediately upon the Sales and Purchase Agreement becoming unconditional. Your bank/lender will ask you for a receipt to show that you've paid for the deposit. Normally, you can request this receipt from your solicitor directly.

2. Frist Home Start Grant and KiwiSaver withdrawal

If you’re buying your first home, you may be able to get there faster, thanks to the following incentives from our government:

• First Home Grant: If you’re a first home buyer and you’ve contributed to KiwiSaver for at least three years, you may be eligible to apply for a First Home Grant of up to $10,000. https://kaingaora.govt.nz/home-ownership/first-home-grant/
• KiwiSaver withdrawal: If you’ve been a member of KiwiSaver for at least three years, you may be eligible to withdraw your saving to purchase your first home. Check with your provider to see if you meet the requirement.

Your bank/lender requires an eligibility letter, either from Kaingaora for First Home Grant or from your KiwiSaver provider, to prove you are eligible to use this fund as the home loan deposit source for buying a house.

3. Personal savings

Personal savings are one of the most common forms of mortgage deposit in New Zealand. If you plan to use your personal saving as the deposit when buying a property, your bank will ask for six months of bank statements of your savings account to show that you have accumulated genuine savings for the past half a year.

This is not limited for just New Zealand savings - you can use overseas savings as well. But the requirements differ from bank to bank. In general, you will expect the bank to ask you for six months of bank statements from your overseas savings accounts to show that you have genuine savings. And on top of that, you’ll need to supply evidence of transferring money directly from your overseas savings accounts into your New Zealand account.

4. Gifted deposits

A gifted deposit is a deposit or part of a deposit that has been gifted to you. Gifted deposits are normally acceptable to all mainstream banks, but they do need to meet certain criteria.

If you receive gift money from your family, such as parents, as the deposit when applying for a home loan, your bank will ask for a Certificate of gift, which needs to clearly state:

• The purpose of the gift is for purchasing a property
• The gift is unconditional, not refundable, and has no interest.

5. Inheritance

Deposit from inheritance is accepted. Solicitor documents may be requested from lenders to assess the inheritance in detail.

6. Borrowed money from close relatives

Not every bank can accept the deposit borrowed from your close relatives. If the bank that you're applying for a home loan can accept this form of deposit source, they will ask for a Deed of Acknowledgement of Debt, within which it needs to outline:

• The purpose of debt
• No interest will be charged
• The specific repayment conditions

7. Deposit from selling assets

If you’ve just sold a property, you may want to use the sale proceeds as the deposit to secure your next property. This is a very common scenario and lenders won’t have any issues with this.

Lenders will need to ask for a Sales and Purchase Agreement as the evidence of your sale. You’ll also need to provide them with your bank statements to show that the sales proceeds have been deposited into your bank account.

In addition to a property, you may have other valuable assets, such as cars, jewellery and anything that has a recognised value, which can also be used for raising the fund needed for purchasing a property.

8. Using existing security equity as deposit

The equity from your existing property can be used as deposit when buying another property. Using equity may allow you to buy a property with a hundred percent borrowing, which means no cash will be needed! We will be covering this in more details in a future episode.

Prosperity Finance – home loan help

Buying a property is exciting, but it can become overwhelming, especially when you start talking numbers. If you’re finding yourself bogged down with massive information, we’re more than happy to help. Not only can we give you a hand with working out how much you can borrow, but we also have all the top tips and tricks for getting your foot on the property ladder. Call us at 09 930 8999 or email: support@profin.co.nz to get in touch with us.  

More Articles:

4 Proven Steps: How First Home Buyers can withdraw their KiwiSaver without confusion

10 tips to maximise your chances of getting approved for a home loan during COVID-19

Mortgage serviceability test rates have finally dropped – You may afford to borrow more now

Using equity to buy an investment property: what might delay your loan pre-approval?

Disclaimer: The content in this article are provided for general situation purpose only. To the extent that any such information, opinions, views and recommendations constitute advice, they do not take into account any person’s particular financial situation or goals and, accordingly, do not constitute personalised financial advice. We therefore recommend that you seek advice from your adviser before taking any action.