First Home Buyer · 27 July 2026
How to buy with less than a 20% deposit when the government scheme is not your route: the three non-scheme doors, and why the one you use changes the cost more than the rate does.
In this article
Yes. In New Zealand you can buy a home with less than a 20% deposit, and plenty of buyers do it with 10%, sometimes less. Outside the government's 5% First Home Loan scheme, there are three main non-scheme routes: a standard bank loan above 80% of the property value (a high-LVR loan), a new-build purchase (which the Reserve Bank exempts from deposit limits), or a family guarantee that tops up your deposit. Each works differently, and the door you use changes the cost of the loan more than the headline interest rate does.
The 20% figure is not a legal minimum. It is the level above which banks lend most freely, because the Reserve Bank limits how much lending they can write below it. Understanding those limits, and the three ways around them, is the difference between a low deposit plan that holds together and one that stalls at pre-approval.
If you think you may qualify for the government scheme instead, that is a separate path with its own rules, and we cover it in how the Kāinga Ora First Home Loan 5% deposit works. This article is about the non-scheme options that most buyers actually use.
People often picture low-deposit lending as one thing. It is really three separate doors, and they are not interchangeable. The deposit each one needs, and what it costs you, are quite different.
| Route | Typical deposit | The catch |
|---|---|---|
| Standard high-LVR bank loan | 10% (occasionally less on an existing home) | Approvals are rationed and a low equity margin usually applies. |
| New build | 10%, sometimes less | Exempt from deposit limits, but the bank's own credit rules still apply. |
| Family guarantee | Less than 10% of your own cash | A family member puts their property on the line to cover the shortfall. |
This is a normal bank mortgage where you are borrowing more than 80% of the price. It is the most common low-deposit route, but banks can only write a limited share of it, so a strong application matters. A low equity margin usually applies until you build equity past 20%.
The Reserve Bank exempts new builds from its deposit limits (Source: RBNZ), so banks can lend to 90%, sometimes more, without using up their limited high-LVR allocation. That often makes a smaller deposit far easier on a new build than on an equivalent existing home.
A parent or close family member offers their own property as extra security for your deposit shortfall. The bank can then treat the loan as if you had 20% equity, which can remove the low equity margin entirely. It is a genuine commitment for the guarantor and is structured carefully.
The right door depends on what you are buying and who can help. A new build sidesteps the deposit limits; a guarantee can wipe out the margin; a standard high-LVR loan keeps you flexible on the type of home. The economics differ more than the rate does.
When you borrow more than 80% of a property's value, the bank is taking on more risk, and it prices that risk. This is the low equity margin (sometimes called a low equity premium). It shows up in one of two ways, and sometimes both:
The key thing to understand is what drives the size of it. The smaller your deposit, the larger the margin tends to be, because a 10% deposit is riskier to the bank than an 18% one. It is not a fixed number: it varies by lender and by your deposit band, and only your lender can quote the figure for your situation. The useful part is that it is temporary. As you pay down the loan and the property builds equity, once you cross the 20% mark the margin generally falls away, which is why some buyers plan an early review or a small lump sum to get there sooner.
In our experience at Trebla, the margin is the part buyers underestimate most. Two loans at the same advertised rate can cost quite differently once the low equity margin is layered on, so it pays to compare the full picture across lenders rather than the front-page number. You can sketch the equity side of this with our house deposit calculator and our LVR and DTI calculator.
A low deposit does not just cost more, it is also harder to get across the line, and the reason is a rule most buyers never see. The Reserve Bank caps how much high-LVR lending each bank can write. From 1 December 2025, banks can lend above 80% on up to 25% of their new owner-occupier lending (Source: RBNZ), up from 20%. New builds sit outside this cap.
Because that allocation is limited, banks tend to steer it toward the strongest applications. So with a small deposit, the rest of your file carries more weight than it would at 20%:
Banks test whether you can afford repayments at a rate well above today's, so stable, provable income does a lot of the work here.
A clean credit history, steady employment, and controlled other debts all make a low-deposit application easier to say yes to.
This is also why a low-deposit pre-approval is worth more when it is well prepared. It is not simply "approved, now go find a house". It is your application competing for a limited slice of the bank's lending, so how it is presented, and which lender you take it to, genuinely matters. A good place to start on the numbers is how much you can actually borrow in NZ, which sets out the three ceilings that decide your limit.
Yes. Banks are allowed to lend above 80% of a property's value, and many buyers purchase with a 10% deposit, sometimes less. Outside the government's 5% First Home Loan scheme, the three main routes are a standard high-LVR bank loan, a new-build purchase (which the Reserve Bank exempts from deposit limits), or a family guarantee that tops up your deposit.
For an existing owner-occupier home, most banks look for at least 10% of the purchase price, and high-LVR approvals are limited in number. For a new build, banks can lend to 90% or occasionally less, because new builds are exempt from Reserve Bank deposit limits. The government's First Home Loan can allow 5% for eligible buyers. Meeting a minimum deposit does not by itself guarantee approval.
It is what a bank charges for the extra risk of lending you more than 80% of the value. It comes as an ongoing margin added to your rate, a one-off premium calculated as a percentage of the loan, or sometimes both. The smaller your deposit, the larger it tends to be, and it generally falls away once your equity passes 20%. The exact figure varies by lender, and only your lender can quote it.
Often, yes. Because new builds are exempt from the Reserve Bank deposit limits (Source: RBNZ), a bank can lend at a higher LVR without using its limited high-LVR allocation. That does not remove the bank's own credit checks on income and stability, but it does take one of the main constraints off the table.
Often, yes. If a family member offers a guarantee secured against their own property to cover your deposit shortfall, the bank may treat the lending as if you had a 20% deposit, which can remove the margin. It is a real commitment for the guarantor and is not offered by every lender the same way, so it is worth talking the structure and risks through before you rely on it.
Useful tools and guides
This article is general in nature and is not financial advice. Lending criteria, lender policies, and relevant rules vary and change regularly. Always seek advice specific to your situation before making decisions. For guidance tailored to you, talk to Trebla Partners Limited (FSP728251) or book a free chat at book.trebla.nz/book. Read our disclosure statement →
