If you’re thinking about getting into your first home, you’ve probably heard the news – house prices in New Zealand are rising and with them the deposit you need to get a mortgage. Here, we break down how much deposit you’d need to buy VS to build, what government assistance you could be eligible for and the cost of building.

How much would I need to borrow?

First things first, you can’t work out how much of a deposit you’d need without knowing how much you want to borrow. To work this out you need to have an understanding of how much houses in your region are selling for and how much you can afford tor repay. Basic rule of thumb is to have your mortgage repayments be no more than 25% of your income.

Use an online calculator (every bank has one on their website) to work out how much you can afford to repay, and therefore, how much deposit you’d need. Bare in mind your price range may also need to factor in the regional price caps to receive Government assistance, as outlined below.

Deposit for buying

Most lenders now ask for a deposit of 20% of the value of the property. So, if the home you are looking to buy costs around $500,000 you’d need a deposit of $100,000 and a mortgage of $400,000.

However, if this is your first home and you intend to live in it you could be eligible for the Welcome Home Loan, which only requires a 10% deposit. These loans are issued by selected banks and other lenders, and underwritten by Housing New Zealand.

Deposit for building

The deposit needed for building your first home varies. Some lenders will approve you for the Welcome Home Loan for building your first home which means only a 10% deposit is needed.

Some lenders make this judgment on a case-by-case basis. Using Westpac as an example, the amount you can borrow depends on several things including the value of your project and your ability to repay the money. The general guidelines for what first home builders may be able to borrow are:

Up to 90% for fully managed turn-key contracts, or up to 65% for labour only contracts;

Up to 75% of the land value if you’re buying a section with services.

Therefore you’d need a 10% or 25% deposit respectively.

There are some home building companies out there who have an affiliation with a bank or lender and can offer house and land packages for as little as 5% deposit so shop around and see if they are right for you.

Using your KiwiSaver

If you’ve been contributing to the KiwiSaver scheme for at least three years, you could be eligible for the KiwiSaver HomeStart grant. Under this scheme there’s up to $5,000 help from the government available for those looking to buy their first home and up to $10,000 for those looking to build.

That’s per person so if you’re buying or building with another person you can combine those grants and really boost your deposit. There are other eligibility criteria to be met as well as regional house price caps to take into consideration.

To add to this, you may also be able to withdraw a significant amount of the money you’ve put into your KiwiSaver account. Find out more about both these options on the Housing New Zealand website.

It’s important to note that the HomeStart Grant cannot be used to build a home only and will need to be put towards the purchasing of land. The easiest way to do this is through house and land packages. Orange Homes offers a number of KiwiSaver eligible house plans that are affordable and contemporary.

Regional cost variations

To buy or to build? Traditionally building has been the more expensive option but in some regions, such as Wellington, rapidly rising house prices have evened the playing field and first home buyers are choosing to build.

According to this Stuff article, new homes in Otago cost on average $396,000 to build. Auckland building costs were slightly lower at $390,000 but as dwelling sizes are smaller, the cost per square metre is much higher.

Building a new home from scratch is a big undertaking, both financially and emotionally; it’s ok to feel a little apprehensive about it. If you have more questions, you might find our free guide helpful – the most commonly asked questions about home building.

To buy or to build?