Lenders have recently clamped down on the deposit requirements for home buyers, so if you are asking yourself “How much deposit do I need for a home loan” you need to read the following so know what banks and other lenders need from you.
The major lenders such as BNZ, ANZ, Westpac and AB have all announced that they are “hitting pause” on borrowers with less than 20% deposit for a home purchase.
However, there are specific circumstances where they will consider lending to borrowers who have less than 20% such as;
- New home purchases (buy a brand new home just being built)
- Building a new home
Non Bank Lenders for a lower deposit
Non bank lenders may also consider borrowers who don’t have 20% deposit and they normally distribute home loans via financial advisers. Non bank lenders also, do not require you to move all your banking to them, which for some people, can be a daunting task to move everything, set up new direct debits, cards etc.
Deposit Sources
You can obtain your home loan deposit from a range of sources such as;
- KiwiSaver
- Gift
- Genuine Savings
- Sale of a major asset
- Inheritance
- Proceeds of previous property sale
Watch your monthly expenses
Previously, lenders were not too concerned about what you spent on Netflix, junk food, entertainments etc but that has now changed. Lenders are keeping an eye on all household expenses and are adding them to what they call fixed expenses.
So the expenses they may have ignored in the past are now being taking into consideration and may reduce your capacity to borrow enough money to purchase the home you want.
90 Day Plan
If you plan on applying for a home loan, what you do and how you spend your money will play a major part on whether you can secure a home loan. Before approaching any lender, you should consider the following.
- Don’t move jobs because lenders want to see stable employment.
- Make sure you are operating within your overdraft and credit card limits. Lenders do not like it when you go over your limits, even if it is by a small amount.
- Try and avoid payment services such as AfterPay, Laybuy etc because this will diminish your borrowing capacity substantially. For example, if you had a limit of $2000 with LayBuy, a lender may look at your total available limit and spread that over 6 weeks. In other words, they would have to allow for $333 per week to repay this amount, no matter what your balance is.
- Don’t create any new debt, and make sure you are meeting your current financial obligations.
Get Advice
If you need help and advice, please contact us and we can help you prepare your finances and arrange your mortgage finance for you.
