Plain answers before you borrow

The maths. You're buying at $800,000 with a $160,000 deposit, so you borrow $640,000. Divide the loan by the value: $640,000 ÷ $800,000 = 80% LVR.

Why 80% is the number everyone talks about. At 80% or below you're in the bank's comfort zone — standard rates, every lender competing for you, no extra charges. Above 80% you're borrowing from a restricted pool, and it costs more.

Why the pool is restricted. The Reserve Bank limits how much low-deposit lending each bank can write. Currently banks can put up to 25% of new owner-occupier lending in the 80–90% LVR band, and up to 10% of investor lending above 70%. Once a bank is near its limit, it tightens up — which is why two banks can give you completely different answers in the same week.

Investors face a tougher line. The threshold for investment property is 70% LVR, not 80% — so a 30% deposit, not 20%.

New builds are exempt. Buying a new build generally sits outside these restrictions, which is why a 10% deposit can work on a new build when it wouldn't on an existing home.

Your LVR changes on its own. Pay the loan down, or the property's value rises, and your LVR falls. That matters: once you're under 80%, you can ask the bank to drop any low equity charge. Banks don't usually offer this. You have to ask.

It's tiered. The less deposit you have, the more it costs. A borrower at 85% LVR pays less than one at 90%. The exact bands and amounts differ by lender and change over time.

What it actually costs. On a $600,000 loan, a margin of 0.50% is $3,000 a year — $250 a month, on top of your normal repayment, paid out of after-tax income.

Margin or premium — the difference matters. A margin sits on your rate and stops once your equity improves. A premium is charged once, usually capitalised into the loan, and you don't get it back if your equity improves next year. Which one applies depends on the bank, and it's a reason to compare lenders on more than the headline rate.

Getting it removed. A margin isn't permanent. Once you're below 80% LVR — through repayments, a lump sum, or the property rising in value — you can ask the bank to take it off. You'll usually need a current valuation, and you'll usually need to ask. It is not automatic, and most people never do it.

Count what you already have first.

KiwiSaver. For most first home buyers this is the largest single piece, and many people underestimate it because they haven't logged in for two years. You generally need to have been a member for a minimum period and must leave a small balance behind, and the money goes to your solicitor at settlement rather than to you. Check your balance today — it changes the conversation more often than not.

A gift from family. Common, and perfectly acceptable to lenders, but it must be a genuine gift. The bank will want a signed letter confirming it isn't a loan and won't need to be repaid. A "loan from parents" is treated as debt and reduces what you can borrow.

Equity in something you already own. A section, a share of a family property, or an existing home that's gone up in value.

Then work on the gap.

Pay yourself first. A transfer on payday to a separate account you don't carry a card for. What's left is what you spend. Trying to save what's left over at the end of the month almost never works, and lenders can see the difference in your statements.

Make your savings visible to the bank. A steady, regular deposit into a savings account over six months does two things: it builds the deposit, and it proves to the lender you can handle the repayments. That second part is worth as much as the money.

Attack the things that cost you borrowing power. Reducing a credit card limit costs nothing and can lift what you're able to borrow more than months of saving would. Clearing a small hire purchase or a buy-now-pay-later account does the same.

Know the number you're aiming at. "Save more" is not a plan. "Get to $85,000 by November" is. Work out the real target — including solicitor's fees, a builder's report and moving costs — and the saving gets easier because it's finite.

How it's counted. Most banks treat a percentage of your card limit as a monthly repayment commitment, whether or not you owe anything. A $10,000 limit gets treated as a few hundred dollars a month of outgoings, every month, forever.

What that does to your borrowing power. That assumed repayment comes straight off the income the bank has available to service a mortgage. The effect on the loan amount is several times the monthly figure — a meaningful chunk of borrowing capacity, for a card sitting in a drawer at zero. [Worked example using current servicing rates to be added]

The same applies to things you may not think of as debt. Buy-now-pay-later accounts. Overdraft facilities. Store cards. An unused gym-finance arrangement. A car loan you're two payments from clearing — it still counts at full value until it's closed.

What to do, and when. Reducing a limit is free, takes a phone call, and is usually the cheapest thing you can do for your application. Closing the account entirely is cleaner still. Do it before you apply, not during — and get written confirmation, because lenders check the credit file rather than take your word for it. Allow time for the change to show up.

One caution. Don't close every line of credit you have the week before applying. A thin credit file has its own problems, and a card you've held and managed well for years shows a repayment history. The goal is a low limit you clearly manage, not no history at all.

The income caps — household income before tax, for the twelve months before you apply:

These are hard limits. A dollar over and the application doesn't proceed. They catch out couples who've both had a pay rise between pre-approval and settlement.

You also need to:

• Be buying a home to live in. Not a rental, not a holiday house
• Be a New Zealand citizen, permanent resident, or resident visa holder ordinarily resident here
• Have at least a 5% deposit, which can include KiwiSaver and a genuine gift from family
• Pass the lender's own credit assessment — Kāinga Ora backing doesn't override the bank's test of whether you can afford the repayments

Second chance. You don't have to be a literal first home buyer. If you've owned before but your financial position now resembles someone who hasn't — after a separation, for example — you may still qualify. It's assessed case by case, and it's worth asking rather than assuming you're out.

The cost: a 1.2% premium. Kāinga Ora charges a Lender's Mortgage Insurance premium of 1.20% of the loan amount. On a $600,000 loan that's $7,200. You can pay it upfront or add it to the loan — and if you add it, you pay interest on it for thirty years. It protects Kāinga Ora, not you.

It used to be cheaper. The borrower paid 0.5% and the government covered the remaining 0.7%. That subsidy was withdrawn in Budget 2025, and from 1 July 2025 the full 1.2% falls on the buyer. If you've read an older article quoting 0.5% or 1%, it's out of date.

Weigh that against the alternative. Borrowing above 80% with a bank means a Low Equity Margin on your rate for as long as your equity stays low. The First Home Loan premium is paid once. Which works out cheaper depends on your deposit, your rate, and how fast you expect to build equity — it's the kind of comparison worth running properly before you commit.

Not every bank offers it. Only approved lenders participate, and each applies its own credit criteria on top. Being declined by one doesn't mean you're ineligible for the scheme.