For many Kiwis, saving a 20% deposit feels like the hardest part of buying a home. The good news is you don’t always need that much. With smart planning, KiwiSaver withdrawals, and the right lender, you can still buy with a smaller deposit and start building equity sooner.

As a mortgage broker in Tauranga, I help first-home buyers and families every week who get approved with deposits under 20%. Here’s how to make it work in 2025.

1) What counts as a “small deposit”

A small deposit means less than 20% of the purchase price. Banks call these low-equity loans and usually charge one of two things:

• Low-Equity Fee (LEF): a one-off cost (around 0.25–1.5% of the loan) added to your mortgage or paid upfront.
• Low-Equity Margin (LEM): a slightly higher interest rate that stays until your loan-to-value ratio (LVR) drops below 80%.

Once you build enough equity through repayments or property growth, the margin or fee can often be removed.

2) Pros and cons of buying with a small deposit

Advantages

• Enter the market sooner instead of chasing rising prices.
• Start building equity rather than paying rent.
• Use KiwiSaver savings or family support to bridge the gap.
• Access promotional rates and bank cash-backs if you qualify.

Considerations

• Slightly higher interest cost at first.
• Less buffer if property values dip.
• Closer scrutiny of income and spending.

Tip: Ask your broker to model “buy now vs wait” so you can see the true long-term cost difference.

3) How banks view low-deposit borrowers

Banks limit the share of new lending under 20% deposit, so competition for those spots can be strong. To approve a low-deposit application, they’ll want to see:

• Steady employment and income.
• Clean account conduct (no missed payments).
• Reasonable debts and living expenses.
• A property that’s sound, insurable, and meets council standards.

Homes in established suburbs like Bethlehem or Greerton and new builds in Papamoa East or Pyes Pa are often easier to fund than high-risk or unusual titles.

4) Strengthen your file before you apply

• Pay down or reduce credit-card and Buy Now Pay Later balances.
• Show consistent savings behaviour in your statements.
• Gather up-to-date ID, payslips, and employment letters.
• If self-employed, have current financials and GST returns ready.

Your mortgage broker Tauranga can package and submit your file to the lenders most likely to approve — and sometimes negotiate to remove a low-equity margin earlier.

5) Using KiwiSaver and other deposit options (no First Home Grant)

If you’ve contributed to KiwiSaver for at least three years, you can withdraw nearly all of it (leaving $1,000 in your account) for a first-home purchase. Combine that with:

• Personal savings or term deposits.
• Family gifts or guarantees (limited parental guarantees are common).
• Non-bank lenders that allow ~10% deposits for strong applications.
• Shared-ownership or co-buying arrangements with friends or family.

6) When it makes sense to wait

• Grow savings and cut debt to improve your LVR.
• Strengthen employment stability or probation status.
• Improve your credit score before lenders run checks.

But if prices start rising again, delaying too long could cancel out those gains. A broker can run a “buy now vs wait” forecast so you see the numbers clearly.

7) Tauranga market view (2025)

Tauranga’s entry-level market remains active. Papamoa and Pyes Pa see steady new-build supply around the mid-$700ks, while Greerton and Gate Pa offer older homes that fit smaller budgets. Banks are again approving ~10% deposits for strong applications with good income stability.

8) Example — first-home buyer success

A Papamoa couple saved 8% and used KiwiSaver plus a small family gift to reach 10%. We placed them with a major bank offering a special 5.89% one-year rate with a 0.75% low-equity margin. By making small extra repayments, they expect to drop under 80% LVR within three years and remove the margin completely.

Bottom line

Getting a mortgage with a small deposit is still possible in 2025 — you just need the right strategy and lender fit. With smart structuring and honest advice, you can buy sooner and start building equity instead of waiting for a perfect market.

Book a free chat to see which banks are currently approving 10% deposits and how to make your application stand out.