In 2013 the Reserve Bank of New Zealand issued “LVR restrictions” – meaning banks are limited in the amount of high loan-to-value ratio lending they can provide. When buying a home (as opposed to an investment property), a high LVR loan is one where the loan is more than 80% of the value of the property.

But while banks are restricted, they are not completely prevented from giving mortgages to people with less than 20% deposit. Banks can make 10% of their lending high LVR – so essentially one in ten mortgages are issued to people with less than 20% deposit.

Because of these limits banks will sometimes have constrained lending capacity, so they’ll tighten their criteria. We know who’s hot and who’s not, and will take your loan application to the right provider at the right time.

If you have less than 20% deposit, you’re not shut out completely – you could be eligible for a low deposit mortgage. Generally, banks look for these things:

Stable employment and income

If you’re employed on a salary you need to be able to show that you’ve been with the same employer for at least 12 months, and if you’re a business owner or self-employed, you’ll need to show 24 months of stable trading history.

Good ability to service the loan from your income

Lenders will often require that the first part of the loan – usually the part that gets the loan down to that 80% threshold – is paid off quickly. This may mean you have higher than normal repayments, and you’ll need to show that your income can meet those.

A very good credit record

This speaks for itself – lenders will be less inclined to give leeway for a poor credit history when you’re asking for a low deposit mortgage. Find out more about credit records here.

Minimal other debts

So low credit card debt, and no hire purchase debts or personal loans.

A record of savings

Generally, this means you have to show 5% genuine savings – money you have saved yourself rather than been given as a gift. You need to show the lender you have extra income and know how to manage it.

If you have all or most of those things, we can negotiate for you with lenders to secure you a low-deposit loan.

Other options if you have less than 20% deposit is going to a lender which isn’t a bank – LVR restrictions don’t cover credit unions or other non-bank lenders. Or you may qualify for a Welcome Home Loan if you have 10% deposit. Welcome Home loans aren’t counted as part of a bank’s permitted high LVR loan percentage. Otherwise you might look at using a guarantor.

If you are accepted for a low deposit mortgage the bank will charge you either a low equity fee or a low equity margin.

A low equity fee is calculated as a percentage of your loan. This fee can be added onto the mortgage so you don’t have to pay it upfront – but that way you will pay interest on it.

A low equity margin is a percentage that is added to your interest rate and remains there until your loan gets down to the 80% LVR threshold. If you can pay off a significant chunk of your mortgage quickly, or increase the value of your home through renovations fast, this margin can cost you a lot less than a one-off fee.

If you have less than 20% deposit and won’t meet a bank’s criteria for a low deposit loan, there are other options.

One is to go a lender which isn’t a bank – LVR restrictions don’t cover credit unions or other non-bank lenders.

If you have 10% deposit, you may qualify for a Welcome Home Loan . Welcome Home loans aren’t counted as part of a bank’s permitted high LVR loan percentage.

Otherwise you might look at using a guarantor.

Finally, you could look to build new rather than buying an existing house, as loans for new houses are exempt from LVR restrictions. And from October 2016, if you buy a newly-built home from a developer, within six months of its completion, your loan is also exempt.