What loan-to-value means
The loan-to-value ratio, or LVR, is the loan divided by the value of the property. A $800,000 house with a $160,000 deposit needs a $640,000 loan, which is an LVR of 80%. The lower the LVR, the less of the price the bank is lending against, and the more a lender relies on your deposit and the house's value.
Why 80% matters
Many New Zealand lenders treat 80% as a line. Above it, they often ask for lenders' mortgage insurance, which protects the bank rather than you, and some lenders set tighter lending criteria for higher ratios. The rules change over time, and each lender sets its own, so check the current position with the bank you're talking to.
The deposit isn't the only cost
A deposit covers the money you put towards the purchase. You'll also need funds for the legal work, a building inspection, a LIM report and moving. Those costs are usually paid on top of the deposit, so plan for them separately. Our first home buyer's guide covers the stages in order.
Where the deposit comes from
Lenders usually want to see where your deposit came from. Savings are the simplest to explain, and statements covering several months help more than a single balance on the day you apply. If family are helping, lenders typically ask for a signed letter confirming the money is a gift and not a loan that has to be repaid.
First home buyers
Kāinga Ora's First Home Loan can let eligible first home buyers borrow with a smaller deposit than most lenders ask for. The eligibility rules, price caps and minimum deposit are set by the scheme and change over time, so check the current terms with Kāinga Ora before you plan around them.