The Complete Guide to the Kāinga Ora First Home Loan
Disclaimer:The below guide is general in nature. Please seek individual financial advice to see how this applies to your situation. Our experienced advisers are on hand to help at no cost to you (T’s and C’s apply).
The Short Answer: The Kāinga Ora First Home Loan is a government-backed mortgage scheme allowing eligible New Zealanders to buy a home with just a 5% deposit. Unlike standard low-deposit bank loans, it allows you to access competitive interest rates without paying a punitive "low-equity margin." To qualify, single buyers without dependents must earn $95,000 or less, while couples, groups, or single parents must earn $150,000 or less.
Kāinga Ora has launched a number of similarly named schemes over the years, and it is incredibly easy to get them mixed up. Before we dive in, let’s clear up the confusion:
First Home Grant: A scheme that gave buyers free cash towards their deposit. This was permanently cancelled in May 2024.
First Home Partner: A shared-ownership scheme where Kāinga Ora bought a percentage of your house. This is permanently cancelled
First Home Loan: A scheme allowing you to buy your own home with as little as a 5% deposit. This is fully active and the subject of this guide.
Now that we are clear on the differences, let’s go through exactly how the First Home Loan works, the strict criteria you must pass, and how it can save you thousands.
Do I have to buy a 'Kāinga Ora Home' or 'KiwiBuild'?
No. Under this scheme, you can buy almost any brand-new or existing residential property on the open market. It is not restricted to specific government housing developments or subsidies. As long as the home is liveable from day one and you intend to live in it yourself, it is likely eligible.
Why use the First Home Loan instead of a standard bank loan?
If you walk into a bank today with less than a 20% deposit, they will view you as a "high-risk" borrower.
To offset that risk, the bank will charge you a Low Equity Margin (LEM). This is a penalty interest rate—usually an extra 0.25% to 1.20%—added on top of your standard mortgage rate. Unlike the Lender’s mortgage insruance one off fee (explained below) this loading on top of the base fee continues for as long as it takes to build the 20% equity in your home.
With a Kāinga Ora First Home Loan, you can buy with just a 5% deposit, but the bank will usually offer you their heavily discounted "Special" interest rates, exactly as if you had a 20% deposit. On a $500,000 mortgage, avoiding a 0.75% penalty margin saves you $3,750 every single year in interest.
How does the scheme actually work?
Kāinga Ora does not actually lend you the money; the bank does.
Kāinga Ora simply acts as an underwriter. They tell the bank: "Approve this 5% deposit loan, and if the borrower defaults, we will insure your losses." Because Kāinga Ora is taking on the risk, you are charged a 1.2% Lender’s Mortgage Insurance (LMI) fee. This fee is capitalized (added) to your total loan amount and paid off gradually. Note: This insurance protects the bank, not you.
What are the eligibility criteria?
The First Home Loan has strict, non-negotiable rules. Here is what you need to pass:
1. First Home Buyer Status
You must be buying your first home. If you own Māori land, you are still considered a first-home buyer.
What if I have owned a home before? (Second Chance Buyers)
If you previously owned a home (e.g., before a relationship separation) but no longer hold any property, you can apply to be treated as a "Second Chance Buyer."
Kāinga Ora will assess your Realisable Assets (cash, term deposits, shares, extra vehicles, boats). Your total assets cannot exceed 20% of the regional house price cap for your area. For example, if your region's cap is $750,000, your total assets must be under $150,000 to qualify for a second chance. (Note: Your KiwiSaver balance is NOT counted as a realisable asset).
2. Income Caps
Your total income before tax over the last 12 months must be:
$95,000 or less for an individual buyer without dependents.
$150,000 or less for an individual buyer with one or more dependents.
$150,000 or less (combined) for two or more buyers.
This is a very strict limit. A dollar over the limit means you will be declined. However, because it is based solely on the last 12 months of your IRD summary, if you recently got a pay rise, returned from parental leave, or graduated, you might still qualify even if your future salary will exceed the cap.
3. Employment Requirements
The bank wants to see stability. You generally need to prove:
You have been in your current permanent PAYE job for the last 12 months.
OR: You have been working in the same industry (or studying for that industry) for the last 24 months.
If you are self-employed, contracting, or have a mix of jobs, the paperwork gets complex. This is where using a mortgage adviser is crucial to getting your application over the line.
4. Deposit & Residency Requirements
The Deposit: You must have between 5% and 19.99% deposit. You cannot hold cash back; you must use almost everything available to you (including KiwiSaver, savings, and gifted family money).
Residency: You must be a New Zealand Citizen, Permanent Resident, or hold a resident visa and be "ordinarily resident" (living and paying tax) in NZ.
Are there downsides to the scheme?
While it is an incredible tool, you need to be aware of the restrictions:
The 1.2% LMI Fee:As mentioned, a $500,000 loan will incur a $6,000 fee added to your balance.
Property Restrictions: You cannot buy a "Home and Income" property, an investment property, or a "doer-upper" that requires extensive structural renovations. It must be liveable immediately.
No Cash Left Over: Because you must exhaust your cash savings for the deposit apart from $10,000, it can be hard to secure extra funds immediately after settlement for things like cosmetic renovations or new furniture.
Find out if you qualify right now
Not sure if your income, deposit, and situation align? Use our First Home Loan Eligibility Checker below to instantly screen your profile against Kāinga Ora's strict rules.
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