The peer-to-peer lender and broking business's new product aims to help borrowers with strong credit profiles but unable to afford a 20% deposit amid soaring house prices.
Squirrel says its Launchpad product is aimed at people with good incomes "but not enough deposit to meet the 20% often demanded by trading banks, or who don’t qualify for the Government’s Kāinga Ora scheme".
Launchpad consists of two loans. One makes up 15% of the value of a property, and is provided by Squirrel's P2P arm, at a fixed rate of 9.95%. The loan is paid off over five years.
The other loan makes up 80% of the value of the property, with lower rates of 2.99% to 3.99%, spread over 30 years and on interest-only terms for the first five years.
After the first five years, borrowers will be left with a typical principal and interest 25-year mortgage.
The overall rate could be as low as 4.09%, the company said.
There are a number of criteria to qualify and the product comes with an "establishment fee" of $1,000.
Buyers must be planning to live in the property, need to be employed and paying PAYE, and will be subject to a credit check. Deposits must be "genuinely saved" (including KiwiSaver), and cannot be gifted.
Apartments need to be a minimum 50m², and require a 10% deposit.
Two friends or siblings can team up to apply for the loans but must live in the home.
In a boost to buyers considering auctions, no property valuations are required for the new product.
Squirrel founder John Bolton said the group wanted to "level the playing field". He said the firm wanted to "reinvent the mortgage market" and promised more innovations were on the way.
"People were coming to us totally frustrated at their inability to buy a home because the market was outstripping their ability to save the required deposit, so we set about designing something that could help as many of them as we could."
He added: "It’s a stepping stone. The idea is to get people into their first home and on the ladder. That’s the hardest bit and Launchpad will solve that for many people.
"It’s not a solution for everything or everyone, but it’s a solution for those with good income and servicing who haven’t saved enough deposit and don’t have the luxury of mum and dad being able to help out."