20% deposit versus less than 20%
With a 20% deposit, the loan is usually at 80% LVR or below. For a standard property, a bank may not require a separate registered valuation, although the lender can still require one based on the property, application, or its policy. With less than a 20% deposit, the lender may require a valuation to confirm the property’s value and security position before completing the assessment.
How the pricing can differ
A deposit below 20% can lead to a low-equity margin, fee, or higher interest rate. You may also qualify for a smaller interest-rate discount or a lower cashback or cash-contribution offer than a borrower with 20% equity. These outcomes are lender- and product-specific, so compare the written offer rather than assuming every lender treats the two deposit levels the same way.
What about Kāinga Ora First Home Loan?
Kāinga Ora’s First Home Loan may allow eligible first-home buyers to apply with a deposit as low as 5% through participating lenders. It has its own eligibility rules, lender assessment, and Lender’s Mortgage Insurance premium. A Kāinga Ora programme or an LVR exemption is not an approval guarantee. Read the current criteria in the Kāinga Ora First Home Loan source below and discuss your circumstances with a participating lender.
Illustrative example: buying with 10% and improving the home
Mere and Sam buy a property with a 10% deposit. The house needs work, so they budget for the costs and, with help from Mere’s dad, paint throughout, put up a new fence, improve the landscaping, and update the kitchen doors without replacing the whole kitchen. After the work is complete, they ask the lender whether a new registered valuation is appropriate. If the valuation supports a higher property value and the loan is then at 80% LVR or below, they can ask the lender to reassess the low-equity pricing, interest rate, and available discounts. A new valuation does not automatically create 20% equity or guarantee a lower rate, and the valuation cost and lender rules still need to be considered.
Evidence categories to organise
- Deposit source
- Current debts and limits
- Low-equity pricing questions
- Property valuation
- Cash needed after settlement
- Current First Home Loan criteria
This guide is general information only. MoreGage does not provide regulated financial advice, a lending assessment, approval, or an offer.