Getting a deposit together to buy your first home is no small feat.
And for many Kiwis, that means getting in with less than 20%.
Which, to be fair, can be a smart move - it gets you on the property ladder sooner.
But there’s one cost that often gets overlooked…
And it can quietly add thousands to your mortgage.
The “Hidden” Cost: Low Equity Fees
If you’re borrowing more than 80% of a property’s value, lenders see that as higher risk.
So they charge what’s known as a Low Equity Fee.
In simple terms - it’s the bank protecting themselves.
There are two main ways this shows up:
And it’s the margin that really bites.
Why It Matters More Than You Think
On paper, the difference might look small. But in reality, it adds up fast.
Let’s say:
That extra margin means:
It’s one of those things that doesn’t feel like a big deal upfront - but becomes a big deal over time.
Here’s the Part Most People Don’t Know
This is where it gets interesting.
That low equity margin doesn’t stay forever.
As your loan reduces (and your property value increases), you’ll eventually reach 20% equity.
That’s the point where the bank no longer sees you as “high risk”.
But here’s the catch…
👉 They don’t automatically remove the margin.
You have to ask.
And in many cases, you’ll need to show proof - like a registered valuation.
Where Advice Really Makes a Difference
This is one of those areas where having the right structure - and the right guidance - can save you a lot over time.
Here’s how I typically help clients with this:
At the start
We compare lenders properly - because not all low equity deals are created equal.
Along the way
We keep an eye on your equity position so you know where you stand.
At the right time
We approach the bank to get that margin removed as soon as you’re eligible.
Because the goal isn’t just getting you into a home…
It’s making sure you’re not paying more than you need to once you’re in it.
Final Thought
Buying with a low deposit can absolutely work.
But it pays to understand the full picture.
Because small differences in structure today…
Can make a big difference to your finances tomorrow.
If you're navigating a low deposit purchase - or already have a mortgage and aren’t sure if you're still paying a low equity margin - it’s worth checking. Feel free to reach out and we can run the numbers!