Low-Equity Premium Calculator

This calculator estimates the low-equity premium, or LEM, that banks charge on a New Zealand mortgage when you buy with less than a twenty percent deposit, a cost many first home buyers do not see coming. Lenders treat a small deposit as higher risk, so they add a premium to compensate, usually as a margin on top of your interest rate and sometimes as a one-off fee. The size of the premium steps up as your deposit shrinks: it is often modest between eighty and eighty-five percent loan-to-value, larger between eighty-five and ninety, and larger again above ninety percent, with the margin commonly falling somewhere between a quarter and one and a half percent a year on the loan. You enter your loan amount, the property value, and the margin rate your bank applies, and the calculator works out your loan-to-value ratio, shows which band you fall into, and calculates the extra cost in dollars per year and per month. Use it to understand the true cost of buying with a low deposit, to compare lenders, and to see how much you would save by getting your deposit to twenty percent. The premium usually drops away once your LVR falls below eighty percent, so ask your bank to review it as your equity grows. Estimate only, not advice.

Banks set their own bands and margins; some charge a one-off fee instead. The premium usually ends once your LVR falls below 80%. Estimate only, not advice.