Buying Your First Home with a 10% Deposit - Pros and Cons

Jeff Elias, Managing Director/Specialist Financial Adviser

September 2019

Press play to watch "5 Pros and Cons of a 10% Deposit"

Did you know there are 5 cons to buying a first home with a 10% deposit, and there are 5 pros? Keep reading to find out all 5.


You could be ready now


Before I get into all 5, I want to tell you a story about a couple who came to me a number of months ago. They wanted to chat about what they needed to do to buy their first home thinking it might be several months or years away.


After about half an hour, I was able to work out, to their surprise, they were in a position to get a pre-approval at that time. Would you believe it?


Within three weeks they, not only made an offer, they secured their first home. It was pretty amazing.


A 10% deposit made their first home possible. It might do the same for you, so let's learn about the pros and cons of a buying a first home with a 10% deposit.

Con #1 - Higher Interest


When you have a 10% deposit mortgage, you're going to have a higher interest rate, and you're going to pay more interest. 


Pro! - It is only temporary.


You're only going to pay that higher interest rate for probably one or two years, because in that time, your mortgage will come down, and your value of your house will go up. Before you know it, you'll be at 20% equity and eligible to get the lower interest rates. Okay, so that's fantastic.

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Con #2 - Registered valuations cost more money


You have to pay for a registered valuation, when you're buying a house with a 10% deposit. This is true. A registered valuation is an added cost - about $750 each.


Pro! - You only pay for it once.


You don't need to get a registered valuation on every house that you make an offer on - only on the house your offer gets accepted. In majority of cases you only have to buy one. The cost is a small price to pay for getting into your first house. Right? So that's pretty reasonable.


Con #3 - A smaller deposit means you have more lending than you would with a bigger deposit.


When you take on a mortgage with a 10% deposit, you're taking on a bigger mortgage, because you need 90% of the proposed purchase price as lending.


Pro! - You are likely paying the same amount or more in rent.


For many people in New Zealand rent is about the same as what your mortgage repayments would be even with a 90% mortgage. So you can decide, do you want to pay your landlords mortgage? Or do you want to pay your own mortgage? In some cases, your mortgage repayments will even be less for some areas of New Zealand. That's why I recommend you get in there and having a go.


Con #4 - A mortgage is a lot of debt.


Buying a house means you're taking on lots of debt. There's no doubt about it. I will use these stones as a visual to help you understand.  Your mortgage might be this big...

Jeff Elias holding a stone as a visual to help you understand that mortgage is a lot of debt

...and the actual value of your house might be this big.

Jeff Elias holding two stones as a visual to help you understand that mortgage is a lot of debt

Yes, you are taking on debt, but you're also taking on an asset. The asset is worth more than your debt. At the beginning, the value of your house is not usually be much more than your mortgage, but it is still bigger. 


Pro! - In time a house is a larger asset than your debt.


As you pay down the mortgage, your house increases in value. Eventually, this will be your mortgage...

Jeff Elias holding two stones as a visual to help you understand that through time  your house is larger than your debt

...and this will be the value of your house.

Jeff Elias holding two stones as a visual to help you understand the value of your house

But to get there, you've got to start with the other stones. Starting early will get you there. Right?


Con #5 - Houses are getting more expensive.


In most areas in New Zealand the value of houses have gone up - even in smaller towns and  regional areas.


Pro! - Increasing home prices motivates you to buy a home now.


What are you waiting for?  The longer you wait, the more home prices will go up. Now, you could argue that you're should wait to save a bigger deposit. Unfortunately, it is unlikely that you can save as fast as the increase in home prices. If you have a 10% deposit, I recommend you check if you can buy now. There are banks willing to lend to you.


Final Thoughts


Housing always costs. You have a choice of paying your landlords mortgage, or your own.


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If you find this article helpful, and you want to check if you are ready to buy your first home now, I recommend signing up for free membership to our Get Mortgage-Ready Hub.




  • Clarity - You'll finally get a 'yes' or 'no' about whether you are ready for to buy.
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In the hub:

  • 8 videos to teach you what to do to be ready to buy your first home
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