One of the biggest points of confusion for homebuyers - especially first home buyers - is the word “deposit.”
One thing that catches a lot of buyers out is that there are actually two different types of deposits involved when purchasing a property.
And while they sound similar, they serve completely different purposes.
So let’s break down the difference between:
Understanding the difference early can help avoid a lot of stress and confusion during the buying process.
When people talk about needing a “20% deposit,” this is usually the type of deposit they’re referring to.
From the bank’s perspective, this deposit is your equity contribution toward the purchase.
For example, if you were buying a property for $750,000, a lender may want you to contribute $150,000 (20%) toward the purchase price.
That contribution could potentially come from:
This isn’t money that gets paid directly to the vendor upfront.
Instead, it forms part of the overall structure of how the property purchase is being funded.
The second type of deposit is the one often requested by the vendor or real estate agent once you sign a Sale & Purchase Agreement.
This deposit is usually around 5% to 10% of the purchase price and acts as a show of commitment to the transaction.
For example, if you purchased a property for $750,000, the vendor may request a $75,000 (10%) deposit when the agreement becomes unconditional.
This money is typically held in a real estate trust account until settlement.
A lot of buyers assume this deposit comes directly from the bank loan, but that’s not usually the case.
Mortgage funds generally aren’t available until settlement day, so the vendor’s deposit often needs to come from funds you already have access to.
This is where things can sometimes catch buyers out.
If you’re planning to use KiwiSaver funds toward the vendor’s deposit, timing becomes really important.
KiwiSaver withdrawals can take time to process, and if those timeframes don’t align with the conditions in the Sale & Purchase Agreement, it can create unnecessary pressure.
That’s why it’s so important to have your solicitor and Mortgage Adviser involved early - especially if KiwiSaver or gifted funds are forming part of the structure.
One thing many buyers don’t realise is that the vendor’s deposit amount can sometimes be negotiated.
While 10% is common, there may be situations where a lower amount is agreed to depending on the circumstances.
The important part is making sure any agreed changes are clearly documented in the Sale & Purchase Agreement before signing.
Once the agreement is signed, you’re legally committed to those terms.
This is a great example of why buying property isn’t just about getting a loan approved.
There are often multiple moving parts involved:
And for a lot of buyers, especially first home buyers, it can quickly become overwhelming.
A good Mortgage Adviser helps you understand how all those pieces fit together before you commit to anything.
The word “deposit” gets used a lot throughout the home buying process.
But understanding which deposit people are referring to - and when those funds are actually needed - can make the process far less stressful.
Smoother property transactions usually happen when buyers understand the structure early, rather than trying to figure it out under pressure later on.
So if you’re preparing to buy and want help understanding how deposits, KiwiSaver, and lender requirements all fit together, feel free to reach out. We’re here to help.