2. Preparing and applying
Learn about the options and opportunities for getting your deposit together, find out how much you may be able to borrow and understand the different steps to having your home loan approved.
In this step, we’ll show you where to find out how much you might be able to borrow – but before that, we’ll take you through some of the options and opportunities that can build and boost your deposit.
At the end of this step, you’ll also know all about the differences between pre-approval and full approval for a home loan. You’ll have mastered the application process, and you’ll be on your way to searching for your new home with confidence.
For most of us, the price we pay for a home is made up of the deposit we contribute 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 you need to meet, before they agree to the loan. Typically, you will be required to have a deposit that is 20% of the home’s purchase price. For example, a home that costs $800,000 might require a $160,000 deposit.
However, if you don't have this amount saved, you may still qualify for a mortgage with a 10% deposit or even a 5% deposit in some cases. It all depends on the eligibility and lending criteria of your bank or lender. It’s always a good idea to speak with your bank or lender, or a mortgage broker before making any decisions about your deposit and type of home loan.
The sorted.org.nz(external link) website has useful information on how to save for a deposit.
Tip – First Home Loan
A First Home Loan can give a helping hand when buying your first home by lowering the deposit required from the more standard 20% to only 5%. First Home Loans are only available through select banks and lenders and are underwritten by Kāinga Ora. Learn more and check your eligibility for First Home Loan.
Personal savings will likely make up the majority of your deposit, but there are also other ways you may be able to boost your savings.
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.
Contact your KiwiSaver or savings scheme provider for more information or learn more about the Kiwisaver first-home withdrawal.
First Home Grant
If you’re a first home buyer who’s been making KiwiSaver contributions for at least 3 years, you may be able to get a First Home Grant from Kāinga Ora to boost your deposit. Members of other complying funds or exempt-employer schemes may also be eligible.
Learn more and check your eligibility for the First Home Grant.
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 Kāinga Ora 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 Kāinga Ora before applying.
Learn more and check your eligibility for the Tenant Home Ownership Grant.
Important!
Depending on the home ownership product or programme you wish to apply for, you may need to choose a preferred bank or lender and meet their lending criteria.
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, we recommend everyone involved seeks independent legal advice, as it can be complicated making sure these methods are accurately and legally represented in your finances.
Gifted funds
If you have a family member who wants to help towards your deposit with a gift, your home loan provider may need to see evidence of the money being gifted or a declaration that includes details like:
- who is gifting the money (the ‘gifter’)
- who is receiving the money (the ‘recipient’)
- the amount of money being gifted
- the purpose the money is being gifted for ( a home purchase)
- confirmation that the money is a gift, is not considered a debt and does not need to be paid back.
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
A guarantee 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, and:
- the first loan is made out to you against the majority value of the home
- a second loan is shared with you and your family member against the remaining value of the home
- the combined loans add up to 100% of the value of the home you’re buying.
You’ll need to pay both loans, and your co-borrower may become responsible for the repayments if you’re unable to do so.
When you’ve got your deposit together, you’ll be ready to apply for a pre-approved home loan. This is where your bank or lender indicates the amount they’re willing to lend you, which means you can start searching for the right home with confidence. You’ll know your buying power, and have a clear idea of the price range you can search within.
What banks and lenders may ask for
Every bank or lender has its own guidelines for deciding whether to approve a home loan, and for how much, but all 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 this information:
Identification: This can include your New Zealand photo driver licence, New Zealand or overseas passport, New Zealand birth certificate, New Zealand citizenship certificate, or certificate of residency.
Current address: This can include a recent utility bill, rates bill, or a recent 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 a set of your most recent payslips (for example, the most recent three months of income). If you are self-employed, you may be able 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 banking statements for a fixed period (for example, 3 to 6 months) that shows a running balance over that time.
Your debts and outgoings: This can be required for the bank or lender to estimate your regular monthly expenditure and can include statements for reccurring expenses such as, insurance, credit cards, current balance on other loans, and hire purchase arrangements.
Tip – using a mortgage broker
If you’re using a mortgage broker, they’ll work with you to get a complete picture of your financial position and negotiate the terms and conditions of a home loan with banks and lenders on your behalf.
How much could you borrow?
Your bank or lender will offer pre-approval (or conditional approval) if you meet its requirements. This is an agreement that sets out what it expects from you and shows the maximum amount you can borrow as long as you meet those expectations.
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.
It’s possible for your home loan pre-approval to expire, and your bank or lender will let you know how long you have before that happens. If your situation changes after you’ve been pre-approved, or you haven’t had enough time to find the right home, you can ask your bank or lender to renew your pre-approval.
Here is a resource from Sorted that may help you in this stage of your journey:
Tip – before you make an offer
Make sure that your pre-approval is current before you make an offer on a home, particularly if your settlement period is lengthy.
What is the difference between pre-approval and full approval?
Receiving conditional approval or pre-approval for a home loan means you have met a bank or lender’s requirements for a home loan, but you haven’t yet found a home to buy. Conditional or pre-approval is an indication of how much you could borrow but not a guarantee you will receive the loan.
Full approval is when you have found a home you want to buy and the bank or lender has made sure it meets their lending conditions. In most cases, full approval confirms the amount the bank or lender is willing to lend you and you can make a formal offer to purchase the 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 also find more information about buying at an auction on Step 4. Buying.
It’s time to add another member to your team.
Solicitor or conveyancer – Buying a home is a complicated legal process. A lot needs to be done correctly and in the right order. A solicitor (lawyer) or conveyancer can represent you during your home buying journey. They can advocate on your behalf, review documents, give you valuable advice on your options and provide conveyancing services (the legal process of transferring property or land ownership from one person to another).
If you’re unsure where to look, you can find a list of solicitors and property specialists in your area at propertylawyers.org.nz(external link) or nzsconveyancing.co.nz(external link).
Working with a solicitor or conveyancer
Solicitors and conveyancers are both qualified to help with property transactions. The main difference is that conveyancers specialise in property transactions only. When choosing a solicitor or conveyancer, it’s always a good idea to get a cost estimate for their services. Some have a fixed fee, while others charge by the hour. Ask them to explain their fee to avoid surprise bills.
Here are some useful website links to assist you with the “Preparing and applying” step.
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