Getting the ways and means

The bank of mum and dad is helping some young people buy their first home. PHOTO / GETTY

Is a 20 per cent deposit standing between you and home ownership? Back in the good (or bad) old days it was possible to buy a first home with a 5 per cent deposit or even none at times as 100 per cent mortgages were available.

Saving up enough for the down payment on a home has become extra hard in the past few years thanks to the Reserve Bank of New Zealand's loan-to-value ratio (LVR) restrictions.

Banks are still allowed to lend a 10th of their loans to buyers with a lower deposits.

New homes also fall outside the LVR rules. A "new" home is one that is yet to be built, currently under construction or completed less than six months before the mortgage application.

Borrowers still need to convince the bank they're in the financial position to buy. There are other tricks to getting a deposit together. They include:

• Beg to the bank of mum and dad. Plenty of parents and even grandparents are providing deposits for their offspring. They should, however, always seek legal advice before lending or gifting deposits. There can be big issues if the first-home buyers are a couple and later split, are friends and subsequently become a couple, or if they default on the mortgage.

• Use non-bank lenders. Broker Stuart Wills of the Mortgage Supply Company says more first-home buyers are obtaining home loans from non-bank lenders because they aren't subject to the same restrictions as banks.

• Borrow your deposit. Banks hate this and like to check your bank statements to ensure you've got the ability to save a deposit. Sometimes, however, first-home buyers can tweak their accounts to make it appear they're good savers.

• Get a Welcome Home Loan. Housing New Zealand's Welcome Home Loan scheme is exempt from the LVR restrictions.

If your income is within certain caps a Welcome Home Loan allows you to borrow with only a 10 per cent deposit. Other schemes such as Housing New Zealand's FirstHome, Kainga Whenua or Tenant home ownership make it possible for people who qualify to buy with a lower deposit.

• Use your KiwiSaver. It's becoming more and more common for KiwiSavers to withdraw their savings as a deposit for their first home and, if they qualify, get a HomeStart grant of $5000 per person for a second-hand home or $10,000 for a new home. That's doubled for couples. Beware that technically KiwiSaver money isn't a deposit. It's usually paid out on settlement.

A mortgage broker can help you sort through the intricacies, although banks are becoming better at dealing with it.

• Buy a more modest property. An easy way to make your deposit go further is to buy a more modest property.

Would a brick and tile home unit do, or could you force yourself to commute further? Wills says he is seeing more cases where people with either a deposit or a good income are teaming up with a sibling or friend to make the numbers work.