How the numbers work: buying a home

Deposit Requirements

1. Minimum 10% deposit (Low Equity Loan - LMI applies)
2. Recommended 20% deposit (No LMI, better rates)
3. Example: $600K home needs $120K for 20% deposit

Deposit Requirements

1. Minimum 5% deposit for new builds
2. Government supports new build lending
3. Example: $700K new build needs $35K for 5%

Loan to Value Ratio (LVR)

1. LVR = Loan Amount ÷ Property Value × 100
2. Example: Borrow $480K on $600K home
3. LVR = $480,000 ÷ $600,000 × 100 = 80%
4. 20% deposit = 80% LVR

KiwiSaver Withdrawal

1. Must leave $1,000 in KiwiSaver account
2. Can withdraw all member contributions + returns
3. Example: $45,000 in KiwiSaver, withdraw $44,000

Borrowing Capacity

1. Combined household income
2. Job stability (probation periods matter)
3. Other income sources (rental, side business)

Borrowing Capacity

1. Total debt ÷ Annual income < 6x (NZ guidance)
2. Example: $100K income → max $600K total debt
3. Includes car loans, student loans, credit cards

Borrowing Capacity

1. Current rate: 6.5%
2. Test rate: 8.5-9.0% (stress test)
3. Must afford repayments at test rate
4. Ensures buffer if rates rise

Example 1: Standard Purchase - Auckland

1. Purchase price: $750,000
2. 20% deposit: $750,000 × 0.20 = $150,000
3. Loan amount: $750,000 - $150,000 = $600,000
4. LVR: 80% (no LMI)

Example 1: Standard Purchase - Auckland

1. Couple, both 5+ years in KiwiSaver
2. Partner A KiwiSaver: $38,000 (withdraw $37,000)
3. Partner B KiwiSaver: $42,000 (withdraw $41,000)
4. Total KiwiSaver help: $78,000

Example 1: Standard Purchase - Auckland

1. Deposit needed: $150,000
2. From KiwiSaver: $78,000
3. Additional savings needed: $72,000
4. Plus costs: $8,000

Total cash needed: $80,000

Example 1: Standard Purchase - Auckland

1. Loan: $600,000
2. Monthly repayment: $3,792
3. Annual repayments: $45,504

Example 2: Low Deposit Purchase

1. Purchase: $600,000
2. 10% deposit: $60,000
3. Loan: $540,000
4. LVR: 90% (LMI applies)

Example 2: Low Deposit Purchase

1. Standard rate: 6.5%
2. LMI premium: +0.75%
3. Effective rate: 7.25%
4. Monthly repayment: $3,686
5. Annual: $44,232

Example 2: Low Deposit Purchase

1. At 6.5% (no LMI): Monthly $3,408, annual $40,896
2. At 7.25% (with LMI): Monthly $3,686, annual $44,232

LMI costs extra: $3,336/year

Example 2: Low Deposit Purchase

1. Need to reduce LVR to 80%
2. Target loan: $480,000 (80% of $600K)
3. Current loan: $540,000
4. Pay down: $60,000 to reach 80% LVR
5. At $500/month extra: Takes 10 years
6. At $1,000/month extra: Takes 5 years

Example 3: New Build Purchase

1. New build price: $720,000
2. 5% deposit: $36,000
3. Loan: $684,000
4. LVR: 95%

Example 3: New Build Purchase

1. Couple, 5+ years each
2. KiwiSaver withdrawal: $50,000
3. Total from KiwiSaver: $50,000

Example 3: New Build Purchase

1. Deposit needed: $36,000
2. From KiwiSaver: $50,000
3. Surplus: $14,000
4. Use surplus for: Costs ($8K) + emergency fund ($6K)

Example 5: Paying Off Faster

1. Monthly: $3,476
2. Total paid: $1,251,360
3. Interest: $701,360

Example 5: Paying Off Faster

1. Monthly: $3,740
2. Total paid: $1,122,000
3. Interest: $572,000

Saves $129,360!

Example 5: Paying Off Faster

1. Monthly: $4,188
2. Total paid: $1,005,120
3. Interest: $455,120

Saves $246,240!

🌍 Real-World First Home Buyer Stories

1. Target: 2-bed apartment, $650,000
2. Saved: $55,000 cash
3. KiwiSaver: $35,000 (Alex), $32,000 (Jordan)
4. Both in KiwiSaver 5+ years

🌍 Real-World First Home Buyer Stories

1. 20% deposit needed: $130,000
2. KiwiSaver withdrawn: $66,000 ($33K each)
3. Cash used: $55,000
4. Subtotal available: $121,000
5. Shortfall to save: $9,000 deposit + $8,000 costs = $17,000

🌍 Real-World First Home Buyer Stories

1. Single income = lower borrowing capacity
2. Bank approved: $500,000 loan max
3. With 20% deposit: $625,000 max purchase

🌍 Real-World First Home Buyer Stories

1. New build townhouse: $680,000
2. 5% deposit allowed: $34,000
3. Loan: $646,000 (95% LVR)
4. Bank approved due to new build exception

🌍 Real-World First Home Buyer Stories

1. Savings: $15,000
2. KiwiSaver: $48,000 (withdraw $47,000)
3. Total: $62,000
4. Deposit: $34,000
5. Costs: $9,000
6. Remaining: $19,000 (emergency fund + furniture)

1. Combined income: $120,000
2. Bank approved: $650,000 loan
3. Purchased: $800,000 home (max budget)
4. Monthly mortgage: $4,108
5. Left no buffer for costs

1. Saved for 4 years
2. Target: $550,000 purchase
3. Saved: $130,000 (23% deposit!)
4. Well above 20% requirement

1. Paid down to $350,000
2. House now worth $620,000
3. Equity: $270,000 (43%)
4. Considering investment property

🔢 Four worked New Zealand examples

1. New build deposit: $700,000 × 20% = $140,000, so the loan is $560,000
2. Existing home deposit: $750,000 × 20% = $150,000, so the loan is $600,000

The existing home needs $10,000 more deposit

🔢 Four worked New Zealand examples

1. New build: $560,000 × 6.0% = $33,600
2. Existing home: $600,000 × 6.0% = $36,000

The existing home costs $2,400 more interest in year one

🔢 Four worked New Zealand examples

1. New build: about $1,000 per year = $5,000, much covered by guarantee
2. Existing home: about $5,000 per year = $25,000 (repaint, roof, insulation top-up)
3. Existing home also pays a pre-purchase building inspection of about $800

Five-year maintenance gap: $25,000 - $5,000 = $20,000 in the new build's favour

🔢 Four worked New Zealand examples

1. A 20% deposit would be $600,000 × 20% = $120,000
2. Priya's deposit: $80,000 ÷ $600,000 = 13.3%

She needs the bank to lend above 80%, which it can only do for up to 25% of its new owner-occupier lending, so approval is not guaranteed

🔢 Four worked New Zealand examples

1. New-build lending is exempt from the LVR restrictions, so the bank is not using its limited high-LVR quota
2. The First Home Loan allows a 5% deposit: $600,000 × 5% = $30,000
3. Priya's $80,000 (13.3%) is well above the 5% minimum

Her loan would be $600,000 - $80,000 = $520,000, and approval is easier because the exemption applies

1. Deposit on signing: $750,000 × 10% = $75,000
2. Balance on completion: $675,000

No construction-period interest, they keep renting until handover

1. Land settles first, so $350,000 is drawn from day one
2. Interest on the land for 9 months: $350,000 × 6.0% × 9/12 = $15,750
3. Build drawdowns average about $200,000 across the build
4. Interest on drawdowns: $200,000 × 6.0% × 9/12 = $9,000

Construction-period interest: $15,750 + $9,000 = $24,750, plus rent while building

1. For property sold on or after 1 July 2024, the bright-line test is 2 years for both new builds and existing homes
2. If the property is his main home, the bright-line test generally does not apply at all

The old 5-year (new build) versus 10-year (existing) split no longer exists

1. Buys an existing rental for $750,000, sells 18 months later for $820,000
2. Taxable gain: $820,000 - $750,000 = $70,000
3. Tax at his 33% marginal rate: $70,000 × 33% = $23,100

A new build sold in the same window would be taxed the same way

🔢 Four worked New Zealand examples

1. Loan split equally: $600,000 / 2 = $300,000 each
2. Aroha's total contribution: $120,000 deposit + $300,000 loan = $420,000
3. Mia's total contribution: $40,000 deposit + $300,000 loan = $340,000
4. Aroha's share: $420,000 / $760,000 = 55.3%

Mia's share: $340,000 / $760,000 = 44.7%

🔢 Four worked New Zealand examples

1. The right of survivorship applies, so Tama's interest passes automatically to Rewi
2. Rewi becomes the sole owner of the whole $800,000 home

Tama's daughter receives nothing from the home, whatever his will says

🔢 Four worked New Zealand examples

1. Tama's 50% share passes under his will to his daughter
2. The daughter inherits an interest worth about $400,000

She and Rewi now co-own the home, each holding half

1. Equity: $900,000 value &minus; $450,000 mortgage = $450,000
2. Sam's share: $450,000 / 3 = $150,000

Priya and Jack can buy Sam's third for $150,000

1. Priya and Jack each fund half of Sam's share: $75,000 each
2. They refinance the mortgage into their two names, releasing Sam from the loan
3. They now own the home 50/50, with equity of $225,000 each

Check: 2 owners x $225,000 = $450,000 total equity

1. The home is the couple's family home, so the $150,000 equity is relationship property
2. Relationship property is generally split 50/50: $150,000 / 2 = $75,000 each

About $50,000 of the parent's $100,000 effectively ends up with the ex-partner

1. The $100,000 loan is a debt repaid to the parent before equity is divided
2. Remaining equity to split: $150,000 &minus; $100,000 = $50,000
3. Split 50/50: $50,000 / 2 = $25,000 each

The parent's $100,000 is returned in full

A 5% Deposit, Not 20%

1. A home costs $600,000
2. A standard 20% deposit would be $120,000
3. With a First Home Loan, a 5% deposit is $30,000
4. That much smaller deposit can be reachable years sooner

You Still Have to Afford It

1. The First Home Loan reduces the deposit hurdle to 5%
2. The lender still checks you can afford the repayments
3. A smaller deposit means a larger loan and higher repayments
4. So budget carefully for the ongoing cost, not just getting in

A Simple Action Plan

1. 1. Check the current income limits for your situation
2. 2. Confirm you are a first home buyer who will live in the home
3. 3. Build your deposit, including any KiwiSaver withdrawal
4. 4. Apply through a participating lender, not Kainga Ora
5. 5. Check you can afford the repayments on the larger loan
6. 6. Compare buying now with saving for a bigger deposit