Is this Possible to Buy a House Without Savings?

20 April 2022

How much deposit do you need as a first home buyer? This really depends on what your budget is for buying a house in New Zealand. For example, your first home deposit may be less if you are buying a house in Christchurch instead of Auckland.


The process of buying a house will usually begin with you needing to organise your finance and working out what you can afford for your first home. You can begin by contacting your bank or a mortgage adviser so you can have an indication of your budget. A mortgage adviser is paid a commission by the bank and deals with multiple banks on a regular basis.


The majority of first home buyers will take out a mortgage to buy a house in New Zealand. If you are taking out a mortgage with the main bank, they require you to have security (i.e. your own savings/deposit and permanent employment) in order for them to give you a loan. The bank will take the property as security for the loan.


Most main banks require a 20% Loan to Value Ratio (LVR) for your main home. This means if you were to take out a $600,000 loan the bank would require a deposit for a first home buyer of $120,000.


Let’s be clear a deposit does not have to be your own savings either, depending on your circumstances you could buy your first home with no deposit at all. Your first home buyer deposit could be made up of the following your savings, your inheritance, a family loan, a gift, cash, your KiwiSaver, and the Kainga Ora Home Start Grant.


The property prices in New Zealand have skyrocketed over the past two years, making it extremely difficult for first home buyers to get a deposit together to obtain a loan. In addition to the recent changes to the new lending rules in New Zealand, this has made it more challenging for the majority of purchasers to obtain a home loan.


These new lending rules are regulated under the Credit Contracts and Consumer Finance Act (CCCFA). These changes require buyers to still have a deposit, which is now significantly higher due to the significant increase in property prices over the past two years.


In addition, the new lending rules require the buyer to have a significantly higher surplus income after expenses. Some of the main banks are allowing some first home buyers to have a minimum LVR of 10%, however, they require your monthly income after expenses to be significantly higher. This makes it challenging for first home buyers to obtain finance.


If you’re in a situation where you have the serviceability but require more security, you could potentially look at loaning monies from a family member or restructuring assets so you then have the security. This means you could purchase a home and not actually have a deposit saved, rather it could be loaned. Then in time you could then look at refinancing and repay the deposit loan with the equity you have gained in the property and any savings. 


You can consider it from the perspective that the monies you were paying on rent and are now going towards your mortgage and home expenses and the monies that you were using to save for a deposit can go towards the repayment of the loan on the deposit. The first thing you should do is contact your bank or preferably a mortgage broker and get them to evaluate your financial situation.


It is potentially possible to buy a house in New Zealand with no deposit at all, however, everyone’s circumstances are unique and require expert advice from a property and trust lawyer and independent financial advice. Please feel free to contact our team for any enquiries in relation to buying your first home, restructuring your assets and succession planning needs.

A couple is sitting at a table with a model house in front of them.

Top 10 buying and selling property questions people ask our Christchurch law team

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Navigating property transactions can be complex, especially in Christchurch's dynamic real estate market. At our Christchurch law firm, Weston Ward and Lascelles, our property lawyers in Christchurch frequently address these common questions from clients. Whether you're a first-home buyer , seasoned investor, or selling your family home, understanding these aspects of property conveyancing will help ensure a smooth transaction. 1. What exactly does a property lawyer do during a property transaction? Our Christchurch property lawyers handle all legal aspects of a property transaction, including reviewing and drafting the Sale and Purchase Agreement, conducting thorough title searches, liaising with your bank regarding mortgage documentation, managing settlement processes, and ensuring proper transfer of ownership. Essentially, we take the reins (and the stress) from you and take control of the house buying or selling process to make sure potential pitfalls are identified and fixed, everything is legal, and your interests protected. 2. When should I engage a property lawyer in the buying or selling process? The short answer is yesterday. The longer answer is that ideally, you should contact us before signing any agreements. Early engagement allows us to review documents, explain conditions, and identify potential issues before you're legally committed. For sellers, we can help prepare your property's legal documentation in advance, making your property more attractive to serious buyers and streamlining the conveyancing process. However, if you have already signed paperwork and have not instructed a law firm, don’t panic – you aren’t the first people, and you won’t be the last. Contact our property law team in our Christchurch offices at your earliest convenience. 3. What are the risks of purchasing a property without proper legal advice? Without quality property law advice in Christchurch, buyers risk overlooking critical issues such as title defects, council compliance matters, boundary disputes, or easements that might impact property value and enjoyment. Unfortunately, Weston Ward and Lascelles’ property lawyers have seen many cases where buyers faced significant, yet avoidable with proper legal representation, unexpected costs or legal complications. Nobody likes the idea of having to pay for legal services, until its too late. It is more cost efficient to pay for legal advice before any issue has snowballed. 
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