2. Preparing and applying
Learn how much you could borrow, build your deposit and understand the home loan process.
Before you jump into house hunting, let’s learn about home loan pre-approval, find out how much you could borrow and explore ways to build your deposit.
For most of us, the price we pay for a home is made up of our deposit and a loan from a bank or other lender.
A bank or lender will let you know how much your deposit needs to be and any other conditions to meet before it agrees to the loan.
Banks may be stricter about who they provide a home loan to. Other lenders may be more expensive to borrow from. They may also have extra charges and not provide cash-back offers. These are often provided by banks.
What is the difference between pre-approval and full approval?
Conditional approval or pre-approval indicates how much you may be able to borrow if the house meets certain lending criteria. It gives you a price range to search for your home with confidence, but it’s not a guarantee.
Full approval is what your bank or lender provides once you’ve found a home you want to buy and they’ve made sure it meets their lending conditions. In most cases, full approval confirms the maximum amount you can borrow. From here, you can make a formal offer to buy a home or bid on it at auction.
Important!
If you want to bid on a home at auction, you’ll need your home loan fully approved beforehand. Talk this through with your solicitor and bank or lender to make sure you meet all the requirements. You’ll find more information about buying at an auction on Step 4. Buying.
How much could you borrow?
Your loan amount will usually be the total price of the home minus your deposit (up to the maximum lending amount). For example, if you buy a home for $650,000 and have a 20% deposit of $130,000, your home loan will be $520,000. You may hear this called a ‘loan-to-value ratio’ or LVR, and 20% is the most common deposit required. However, you may receive a lower-deposit mortgage depending on the eligibility and lending criteria of your bank or lender. Talk to your bank, lender or mortgage broker to see what they can offer you.
Tip – getting a help hand with a Kāinga Ora First Home Loan
A Kāinga Ora First Home Loan can lower the required deposit from the usual 20% to only 5% for first home buyers. Learn more and check your eligibility for First Home Loan.
Tip – Accessing finance with Kāinga Whenua Loan
Kāinga Whenua Loan is designed to help whānau Māori achieve their housing goals and remove some of the barriers to accessing finance. It can be used to build, purchase or relocate on multiply-owned Māori land. Learn more by downloading the Kāinga Whenua Loan brochure [PDF, 1.6 MB].
Personal savings will likely make up most of your deposit, but there are other ways to boost your savings.
Getting help from family
Sometimes family can help you into your first home with things like gifts, loans or guarantees. If a family member is helping you, it’s recommended everyone involved seeks independent legal advice.
- Gifted funds - This is when a family member wants to help towards your deposit with a sum of money. Your home loan provider will need confirmation that the money does not need to be repaid.
- Borrowed funds - Borrowed funds are when someone contributes a sum of money towards your deposit and you make an agreement to pay them back. This could be when the home is sold or when you’re in a financial position to repay the loan.
- Guarantees - This is when someone (such as a family member) uses a home they own as extra security to guarantee your loan. They become a guarantor, taking responsibility for part or all of your home loan if you’re unable to pay it.
- Co-borrowing - Some banks and lenders offer co-borrowing (or joint borrowing) where you can get a home loan with the support of a family member. This usually means there’ll be more than one loan. You’ll need to pay both loans, and your co-borrower may become responsible for the repayments if you’re unable to do so.
Tenant Home Ownership Grant
If you’re a current Kāinga Ora social housing customer, you may be able to get a grant to buy the home you live in. Conditions apply and not all Kāinga Ora homes are available to purchase, so it’s a good idea to check with us first. Read more on the Tenant Home Ownership Grant.
KiwiSaver first-home withdrawal
When you’re buying your first home, you may be able to make a KiwiSaver withdrawal to go towards your deposit. You’ll need to have been contributing to a KiwiSaver fund (or other eligible savings scheme) for at least 3 years. Remember, at least $1,000 has to stay in your fund after your withdrawal. Read more on the KiwiSaver first-home withdrawal.
Tip – using your KiwiSaver savings
Make sure your KiwiSaver funds are ready before the sale and purchase agreement goes unconditional and you need to pay the deposit.
Learn more about the Kāinga Ora home ownership products.
Once you’ve got your deposit together, you can apply for a pre-approved home loan. Your bank or lender will let you know how much you can borrow so you can start searching for a home with confidence.
What banks and lenders may ask for
All banks or lenders will look at your overall financial position and history, your debts and obligations and your ability to repay a home loan. As part of this, you may be asked to provide:
- Identification - This could be your New Zealand Driver Licence, passport, or New Zealand birth, citizenship or residency certificate.
- Current address - This could be a recent utility bill, rates bill or bank statement addressed to you at your current address.
- Your deposit - This might be a banking or savings balance statement showing the total deposit you have available inclusive of all savings, withdrawals, grants and gifts.
- Your income - This could be your most recent payslips (for example, the most recent 3 months of income). If you are self-employed, you’ll be asked to provide an income summary from Inland Revenue or a copy of your most up-to-date financial statements from an accountant.
Learn more about financial statements or how to get an income summary at ird.govt.nz(external link).
- Banking or credit history - This is usually a set of your bank statements for a fixed period (for example, 3-6 months).
- Your debts and outgoings - This might include statements for reoccurring expenses such as insurance, credit cards, other loan balances and hire purchase arrangements.
Important!
Your pre-approval will typically expire after a fixed period, so make sure it’s current before you make an offer on a home. If your situation changes or you haven’t had enough time to find the right home, you can ask your bank or lender to renew your pre-approval before it expires.
Progressive Home Ownership
Progressive Home Ownership (PHO) is a government initiative aimed at helping people who can’t afford to buy a home in today's property market due to financial constraints.
You may be eligible for a rent-to-buy, shared ownership or leasehold arrangement under one of many PHO schemes.
These programmes are managed by approved providers such as Habitat for Humanity New Zealand(external link) and Housing Foundation(external link) among others.
For full list of approved PHO providers and eligibility criteria, visit Ministry of Housing and Urban Development.(external link)
The Whenua Māori Service
Tupu.nz provides The Whenua Māori Service to help with whānau aspirations on Māori-owned freehold land. Its advisors help in connecting, developing and using your whenua, providing support to reach your goals at any stage of your journey. If you own or have a share in Māori land, you can find more information here(external link).
It’s time to add another member to your team.
Solicitor or conveyancer – A solicitor (lawyer) or conveyancer can help you with the legal process of buying a home. They will give you valuable advice on your options. They also handle transferring property or land ownership from one person to another.
You can find a list of solicitors and conveyancers in your area at propertylawyers.org.nz(external link) or nzsconveyancing.co.nz(external link).
Insurer or insurance broker - Home insurance will likely be a condition of your home loan, so it’s a good idea to think about your options early on. You can find useful information about home insurance at sorted.org.nz(external link).
Important!
Solicitors and conveyancers are both qualified to help with property transactions. However, conveyancers specialise in property transactions only. When choosing a solicitor or conveyancer, it’s good to get a cost estimate for their services. This helps you avoid surprise bills.
Here are some useful website links to assist you with the “Preparing and applying” step.
- Checklist – Preparing and applying [PDF, 148 KB]
- Tupu.nz(external link) – The Whenua Māori Service
Financial products to help you buy a home:
Sorted resources to help with your deposit and savings:
- Sorted.org.nz(external link)
- Budgeting tool(external link)
- Find out how much of a mortgage you could get(external link)
- Goal planner(external link)
- How to save for a deposit(external link)
- How to save your money(external link)
- Mortgage calculator(external link)
- Savings calculator(external link)
Places to find a lawyer or conveyancer:
IRD:
Page updated: 12 February 2024