How to buy your first home with no deposit

Putting together a deposit can seem impossible these days – but what if we told you that you could purchase a home in New Zealand without any deposit at all? Zilch, nada, not a penny in the bank required.

Read more: How to get a first home loan in NZ with less than 20 per cent deposit

FIRST HOME GRANT AND FIRST HOME LOAN

Short of finding pirate treasure on your morning jog, there are very few ways you can put together enough cash for a house deposit without a lot of hard work. But there are two main tricks you can use to get your home purchase across the line: the First Home Grant combined with the First Home Loan.

First Home Grant

The government-provided First Home Grant could give you up to $20,000 to put towards your deposit.

You can get the maximum amount allowed by the grant by:

• being eligible (here are the eligibility criteria).
• buying off-the-plan or a new build (including KiwiBuild) below the regional price caps.
• contributing the minimum to your KiwiSaver for at least 5 years (more years = more grant).
• getting your partner to do all of the above as well.

All you have to do is fill out a form – if you are eligible.

NB you will need to prove that the value of the grant you receive is equal to 5% of the value of the home you are intending to buy. Have somewhere in mind before you apply.

Don’t quite hit all of those points? That’s okay, you can still get some of the grant, just not the maximum.

First Home Loan

Next, combine it with the First Home Loan. This is another government ‘grant’, but it doesn’t give you any actual cash. Instead, it allows you to only need a 5% deposit to get a home loan through some specific lenders.

Similar to the First Home Grant, you’ll need to fit some eligibility criteria, but otherwise it’s just another form to fill out.

Now, you have $20,000 to be used as a 5% deposit. Do the maths, and you’ll be able to buy a $400,000 home!

CHOOSING THE RIGHT HOME

$400,000 may not seem like much when the average home is a lot more expensive, but the reality is that most first home buyers don’t buy ‘average’ homes!

Instead, first home buyers look at what’s called the ‘first quartile’ – that’s just the cheapest 25% of homes in a particular market. Depending on where you want to buy, $400,000 is more than enough to get into one of these bargain homes.

In Otago, for example, a first quartile home in April of this year was $330,000. Your deposit more than covers it!

And even in the more expensive markets like Auckland, you can find homes that may need some TLC or DIY, but are bargains as a result.

Apartments are a good shout as well, especially if you can find some KiwiBuild options. Kiwibuilds are designed for first home buyers with low deposits, and have their prices capped. You still have to be eligible, but you may find a KiwiBuild that fits into your price range.

Just remember to get your KiwiBuild eligibility sorted out early, or you may miss out.

TOPPING UP THE DEPOSIT

You may want or need a home that’s just a little out of the $400,000 price range. If you qualify for the maximum First Home Grant amount, that means that you (and your partner) have at least 5 years of KiwiSaver tucked away.

You can draw down on this KiwiSaver (or a proportion of it, at least) to use as your house deposit. It’s not quite ‘no deposit’, but considering you can only draw it down for a first home or for retirement, it’s not like your regular cash in the bank!

Drawing down your KiwiSaver could be the difference between a $400,000 home and a $500,000 home – or more, depending on how much of your income you set aside each paycheck.

Buying a home without a deposit is tough, but it is possible! If you’re having trouble getting a loan through the main banks, ask your broker about your options with Avanti Finance today. We may be able to help when the big banks can’t.