How To Build a Deposit For Your First Home

When people think about buying their first home, the deposit is often the part that puts them off the most. Many people assume they need a huge amount of savings and a large deposit before they can even talk to a mortgage adviser.

In reality, there are a range of different deposit options and support available for first home buyers. Understanding what can count towards your deposit and how these options can work together can make the process feel far less intimidating and help you feel one step closer to buying your first home. This is why reaching out to a mortgage adviser early can be so helpful, as it allows you to understand where you stand right from the start.

For first home buyers, deposit options can start as low as 5% in some situations. This often surprises people, as buying can be much more achievable than they realise.

Where your deposit might come from

Savings

Savings are usually the first thing people think about when it comes to buying a home, and they are often the biggest concern. Many buyers worry that they do not have enough saved or that they are not saving fast enough.

You may not always need savings for your deposit, but it is still a good idea to have some money set aside to help cover the extra costs of buying a home.

One strategy that can help is looking at the difference between what you currently pay in rent and what your future mortgage repayments might look like. If your repayments are likely to be higher than your rent, regularly saving that difference can show a bank that you are comfortable managing the higher outgoing. It also helps build up your savings at the same time.

Example: Mike is currently paying $480 per week in rent. After running some numbers, he learns that mortgage repayments on a similar property could be closer to $550 per week.

Mike then starts putting aside the $70 difference each week. This helps grow his savings and also shows the bank that he is comfortable managing the higher outgoing before committing to a mortgage.

Kiwi Saver

Kiwi Saver plays a significant role for most first home buyers. It often makes up a large portion of the deposit and in some cases can even make up the entire deposit amount.

It is important to remember that you must have been contributing to KiwiSaver for at least three years to use it for a first home purchase. You also need to leave $1,000 in your KiwiSaver account after your withdrawal, so this amount cannot be used towards your deposit.

Support from family

Some buyers receive support from family in the form of a gift. This can be a helpful way to boost a deposit, even if the amount is relatively small.

If gifted funds are being used, banks will require documentation such as a gift certificate or a deed of acknowledgement. Even if the money is already sitting in your bank account, banks need to clearly understand where it has come from. Large unexplained sums appearing in an account can raise questions, so having the correct paperwork in place is important.

Selling an asset

In some cases, buyers choose to sell an asset to help build their deposit. This could include a vehicle, investments, shares, or other valuable items. Whether this is a suitable option depends entirely on your personal situation and longer-term goals.

Remember the additional costs

While building a deposit is an important part of buying a home, it is also important to remember that the deposit is not the only cost involved. There are additional expenses to allow for, such as legal fees, reports, and moving costs. Having some extra funds set aside for these costs can help the process run more smoothly and reduce stress along the way.

There is no set timeline or right way to build a deposit, which is why understanding your own position early can be so valuable. A simple conversation can help you map out realistic goals and give you a clearer idea of what you are working towards, even if buying is still a future plan.