Ways to raise your deposit for a first home.

If you are a first home buyer, you probably think raising a deposit for a home can be a massive mountain to climb. But there are lending options ranging from 5% (saved) so you may be closer to your first home than you think.

Building a deposit can seem like a massive challenge but the hardest part is getting started and being disciplined. It also involves avoiding niggly debt or purchases you don’t need.

Here are some options to help you along the way to getting together a deposit for a first home:

1. The simple and most obvious option is getting a savings plan together. Look at how much mortgage/rates/insurance payments might be per week vs what you currently pay in rent and start saving the difference. This is a massive positive for the bank if they can see you have been matching savings and rent to possible mortgage & home ownership costs.
2. Contribute to KiwiSaver, even increasing from 3% to 8% if you think that will help you be more disciplined. Once you have been in and contributed to KiwiSaver for at least 3 years, you can withdraw most of it as a deposit for a first home.
3. Sell stuff! You would be surprised how much you could maybe raise by selling unwanted clothes, cars and stuff around the house. Every little bit helps!
4. Parental gift – more and more these days we see parents helping with a contribution. On average it would be around $20,000-30,000. Even $10,000 could be just enough to get you over the line to having a meaningful budget.
5. Parental Deed of Acknowledgement of Debt – this is like a loan, but it has no repayments, no interest charged, no encumbrance lodged on the title and is only repayable back to the parents on sale of the house (or possibly future refinance or top up).
6. Parental guarantee – this is a bit tricky as parents need to have substantial equity and ideally still working (ie reasonable income). This is where part of the parents’ property is used as collateral to allow the kids to borrow a bit more and have at least 20% deposit/equity. The parents are then liable for that portion of lending being secured against their house. So, it doesn’t suit everyone, and parents need to be fully financially assessed as part of the process.
7. Another option is where parents buy a ‘rental property’ in their name and the kids pay the mortgage and outgoings on their behalf. Then in a few years the kids buy the property off the parents and equity built up in the property is transferred to the kids assuming they can get bank lending. This then forms part of their ‘deposit’.
8. Kainga Ora First Home Grant, ranging from $5-10k per person if you meet certain criteria, check their website for details.

The above are just some of the options to help reach your first home goals. We help lots of First Home Buyers so please reach out to us with any questions.