Squirrel Launches A 5% Deposit On Mortgages, But What’s The Catch?

Apr 22, 2021
By Staff writer

Table of Contents

Are you having difficulty meeting the 20% minimum mortgage deposit requirement of most banks? Squirrel — one of New Zealand’s biggest mortgage brokers — now lends to borrowers for as little as a 5% deposit rate!

On 21st April 2021, Wednesday, they launched the Launchpad lending product. This is aimed to help first-time homebuyers who may not have enough to pay the 20% required by most banks or those who may not be eligible for the Kainga Ora scheme by the government.

Squirrel was able to achieve this low deposit rate because non-bank lenders are excluded from the Reserve Bank’s loan-to-value (LVR) restrictions. Chief Executive John Bolton said Launchpad is motivated because Kiwis are always venting out their frustrations at their inability to buy a home. 

Kiwis can finally buy a home even with a very limited budget. While this can be a gamechanger for a lot of people, it may not work for everyone. What’s the catch? Here are essential things you need to know about the low deposit on mortgages.


Squirrel’s Launchpad consists of two loans 

Loans are split into two types to match the needs of different Kiwis.

  1. The first loan is based on 15% of the value of your property This is financed by Squirrel’s peer-to-peer lending platform at a rate of 9.95% per annum. This is paid over 5 years, with the repayments including the principal and interest.
  2. The other loan is made up of 80% of the value of your property. The interest rate can be either fixed or floating, from 2.99-3.39% per annum. It’s a 30-year loan with the first 5-years going to interest only. At the end of the interest-only term, the loan can be turned into a typical principal and interest over 25 years.

Source: Scoop.co.nz

The all-up borrowing rate is at 95% LVR, but it can get as low as 4.09% per annum. The loans require the payment of an establishment fee of $1,000. Compared to the competition, some banks offer loans for as low as 2% interest but may require a higher deposit.

Apartments need to be at least 50sqm

If you’re buying an apartment, Squirrel needs it to be at least 50sqm on a 10% deposit. This will surely help first-time homebuyers, especially as most banks require a 20% deposit to get into the very competitive apartment market.

While friends and family can apply for loans together, you can only apply for up to two. They must also both live in the property upon purchase. This can lower the loan amount of your purchase, which is great if you’re on a tight budget. However, Kiwis who are looking to downsize may not be able to take advantage of smaller apartments.

Only homes in metropolitan areas are eligible

If you want a home outside urban areas, you may not want to consider Squirrel’s Launchpad. It’s only eligible for homes in metropolitan areas such as Auckland, Wellington, and Christchurch, to name a few. Plus, deposits must be from your savings account. KiwiSaver can be included, but gifted funds can’t be accepted.

The maximum Launchpad loan for these metropolitan areas is at 95% LVR at $800,000 or $1.2 million at 90% LVR. In comparison to Kainga Ora, the price cap for new properties in Auckland is $700,000 and $625,000 for existing properties. In Wellington, the price cap is $650,000 and $550,000. In Christchurch, it’s $550,000 and $500,000.

Kiwis must be employed before getting approval

Launchpad is aimed at Kiwis who may not have enough savings but are earning good money. As well as being a first-time homebuyer, you must be paying PAYE income tax. You must also intend to live in the property full-time. If you’ve recently purchased a home, you may not be eligible for this low deposit rate.

In most cases, there are no property valuations required. This keeps everything easier for first-time buyers from getting into the market. This also allows buyers to go to an auction without the expensive valuations before getting approval funding.

Launchpad is not a one-size-fits-all mortgage

Bolton said himself that Launchpad isn’t an “everything for everyone” solution. It aims to specifically service Kiwis who earn a good income and don’t have parents to help them out in their home purchase. If you don’t meet these requirements, you may be better off on a different mortgage with a higher deposit.

If you’re looking for different rates, use our mortgage calculator right here at glimp. We can help you find the best mortgage rates that may fit your needs, financial situation, and lifestyle. It only takes a few clicks to get you customised results.

Compare and save on your mortgage using glimp’s free mortgage calculator.

Shane Egan (Popup) , 2023-07-10

Excellent service. Responsive and easy to deal with. Got me an awesome deal on Broadband. Well worth calling to see what they can do. 👍

Jamie Martin , 2023-06-18

Really great service, helped us save about 30% on power plus a free $100 sign up bonus. Very fast and efficient.

Kat W , 2023-06-20

Very helpful and informative. Lovely chatting with them on the phone, helped me find a power supplier, pretty simple and straight forward

Dee Painter , 2023-08-08

So easy to use, very helpful and got a great deal with my power and gas