What are your options for a house deposit?

What are your options for a house deposit?

Before you commit to a sale and purchase agreement, you need to have your finances in order. One of the milestones of buying your first home is when you pay the vendor the deposit, and it’s often one of the earliest conditions due as part of a purchase.

Here are some of your options for a house deposit. The good news? You may not always have to foot the bill yourself.

Common ways to get your house deposit

When you’re embarking on the process of buying your first home, one of the things you’ll need to have ready is your deposit. Depending on the arrangements you’ve made for finance or for pre-approval of it, you may already have this in order before you sign your sale and purchase agreement.

Alternatively, you may be someone who’s looking for an alternative to paying out of your own pocket from your savings.

For first-home buyers, there are actually a few options available when it comes to paying your house deposit. Some commonly accepted options are:

- KiwiSaver scheme first home withdrawal

- KiwiSaver homestart grant

- Gifted house deposits

- A family equity loan

- A welcome home loan

KiwiSaver options for a house deposit

If you’re employed, your employer will have automatically enrolled you in a KiwiSaver scheme. There’s no need to join KiwiSaver unless you’re self-employed or a contractor of some kind for the tax year. If you’re not sure about your KiwiSaver status, you can head to the Inland Revenue website and go through the myIR login process to see what information the government has on hand (including your tax bill).

Not sure whether you can use your KiwiSaver funds towards your house deposit? Our first-home buyers’ hub has an article covering KiwiSaver eligibility criteria and the overall process. Generally, to access your KiwiSaver options, you have to start by contacting your scheme provider who will then give you some forms for you to fill out with your lawyer. These forms should be submitted 15 to 20 working days before any payment dates where you’ll need the money.

Those who can put their KiwiSaver towards their deposit can do this in a few ways. The KiwiSaver first home withdrawal program lets you make an early withdrawal from your KiwiSaver scheme provider of everything but $1000 from your funds. You can use this money towards a deposit or towards the settlement of your home.

There’s also the KiwiSaver home start grant, applied for through Kāinga Ora. Depending on the type of house you’re purchasing, the government can contribute up to $10,000 towards your purchase. Just like the first home withdrawal, you’ll have the option of putting the money towards a house deposit too.

Gifting and family equity loans

If your family is willing to chip in when it comes to you buying your first home, then great! Gifting and family equity loans are the most common ways that this manifests during the purchase process.

Gifting is pretty straightforward - mum or dad have given you some money, and you want it to be used towards your house deposit.

However, your lawyer or finance provider will want a written assurance from your family that the money is in fact a gift i.e. that you won’t have to pay it back in the future. You should have a gifting letter prepared, which often looks like a statutory declaration signed by the family member gifting the funds that you don’t have to repay them.

Family equity loans are a little trickier, and these will have to be arranged with your finance provider.

We definitely recommend that you get advice from your lawyer because they essentially make a family member liable for the debt you accrue related to your first home purchase. They involve you and the helpful family member co-signing a loan for your deposit, and you being on the hook for the rest of the price of your home. Usually, your bank will then take a mortgage over your family member’s property, and this will be released when you’ve repaid the deposit portion of the loan to them.

Welcome home loan

A welcome home loan from someone like Nest Home Loans could also be an option for you. This type of home loan is geared towards new buyers with a low deposit who want particular interest rates suited to their home-buying situation.

While how much you will be able to borrow will differ based on your circumstances, your welcome home loan should ensure that you have funds in place to pay for your deposit when the time comes. If you need flexibility in terms of access to money before settlement for your house deposit, then this type of loan might be right for you after you’ve consulted your chosen finance provider.

Do you have other questions about buying your first home or about what you’ll need to buy once you move into your dream house? Check out our first home buyers hub, with advice on everything from financing to LIM reports.