Almost every first home buyer in New Zealand will start with less than a 20% deposit and of course that generally means that you (as the first home buyer) will not be getting the best deal from the bank.
Your aim therefore should be to get to 20% equity as quickly as possible.
If you started with a 5% deposit then it might take a bit longer than if you had a 10% or 15% deposit. The problem with the banks is they penalise you even if you had a 19% deposit!
So how do you get to 20% equity?
There are two ways to build your equity and in most cases they work together:
- You will be reducing your mortgage owed with each repayment that you make, and if you can increase your repayments then that accelerates how quickly you build your equity.
- Your home will most likely increase in value over time.
For the purposes of this calculation we have used a default growth rate of 3.00% which is based on the Government stats websites.