Refinancing Your First Home Partner Loan (Without Buying Out Kāinga Ora)

Written By Andrew Palliser

Disclaimer: The below guide is general in nature and do 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).

Wait, Which Scheme Are We Talking About?

Kāinga Ora has launched several similarly named schemes over the years, which often causes massive confusion. Before we dive into the banking strategy, let’s be clear on exactly which scheme this guide covers:

• First Home Grant: The scheme that gave buyers free cash towards their deposit. (Permanently cancelled in May 2024).
• First Home Loan: The scheme allowing eligible buyers to purchase with a 5% deposit. (Fully active).
• First Home Partner (The focus of this guide): The shared-ownership scheme where Kāinga Ora bought a percentage of your house alongside you. (Closed to new applicants, but actively used by thousands of existing homeowners).

If you bought your property using the Kāinga Ora First Home Partner (FHP) shared-ownership scheme over the last few years, you likely secured a fantastic stepping stone onto the property ladder.

While the FHP scheme is now fully subscribed and closed to new applicants, thousands of Kiwis are currently living in these shared-ownership homes. And as we hit the two-to-three-year mark, a massive question is popping up: My fixed interest rate is expiring, and my bank's cashback clawback period is ending. Can I refinance to a different bank to get a new cashback, even if I can't afford to buy out Kāinga Ora's share yet?

The short answer is yes. You absolutely can move your mortgage to a new bank and secure a new cash contribution, all while keeping Kāinga Ora’s equity share completely untouched.

Here is a plain-English look at how refinancing a First Home Partner property actually works, the rules you have to follow, and the specific lenders you are allowed to use.

1. The Core Concept: Moving the Debt, Not the Equity

To understand how this works, you have to look at how your property ownership is structured. Right now, there are two distinct financial pieces attached to your home:

• The Bank Mortgage: The money you borrowed from your current bank (which you pay interest on every fortnight).
• The Kāinga Ora Share: The equity percentage Kāinga Ora owns (e.g., 15% or 20%), which sits on the property title alongside your name.

When you refinance for a better interest rate or a cashback, you are only moving the Bank Mortgage piece. Kāinga Ora’s equity share stays exactly where it is. You are simply asking Kāinga Ora for permission to swap out the bank that sits in the "first mortgage" position on your title.

2. The Catch: Participating Lenders Only

In a standard mortgage refinance, your adviser will advise you on how to get the best deal on your loan from every major bank in New Zealand to find the highest cash contribution and the lowest rate.

With a First Home Partner loan, our options are more targeted. Because Kāinga Ora is a co-owner of your property, they will only allow you to hold a mortgage with an officially approved Participating Lender.

For example, if your current mortgage is with BNZ, you cannot simply refinance to ANZ or ASB, because those banks do not participate in the shared-ownership scheme. We would instead look to move your loan to Westpac, SBS Bank, or Kiwibank—lenders who understand the legal framework of FHP and are happy to sit alongside Kāinga Ora on the title.

3. Why Refinance? The Cashback Maths

If you are restricted to a smaller pool of banks, is it still worth moving? Absolutely.

Banks aggressively compete to win your mortgage debt. If your initial 3-year clawback period has expired at your current bank, moving to another participating lender can trigger a brand-new cash contribution (cashback).

For example, if you have a $600,000 bank mortgage, a new participating lender might offer a 0.80% or 1% cash contribution to win your business. That equates to $4,800 to $6,000 in tax-free cash landing in your account on settlement day. Even after paying your solicitor to handle the legal transfer (usually around $1,200 to $1,500), you walk away thousands of dollars ahead. You can use this money to cover the rising cost of living, build an emergency buffer, or optimally, dump it straight onto your mortgage principal to reduce your debt faster.

4. The Golden Rule: No Top-Ups Without KO approval

When standard homeowners refinance, they often use the opportunity to borrow an extra $30,000 to renovate the kitchen or buy a car. Do not attempt this without strict pre-approval from Kāinga Ora.

Because Kāinga Ora’s primary goal is for you to eventually buy back their equity share within 15 years, they heavily monitor your debt levels. They do not want you taking on additional bank debt if it compromises your ability to eventually buy them out.

If you want a simple, smooth refinance to capture a better interest rate and a cashback, it needs to be a "dollar-for-dollar" refinance. This means you are simply replacing your exact current loan balance with the new bank, rather than asking for extra money. (If you do legitimately need further lending, we must submit a formal 'further lending request' and financial capacity assessment to your Kāinga Ora Relationship Manager for approval first).

5. Getting Kāinga Ora's Consent

Because they are a co-owner, Kāinga Ora must legally consent to your refinance. You cannot just switch banks behind their back.

Once we have negotiated the best rate and cashback with the new participating bank, your solicitor will draft a "Deed of Variation of Priority" (or similar priority agreement). This is the legal document where Kāinga Ora officially agrees to let the new bank take over the primary mortgage security. It is a standard administrative process, but it does take time. You should allow at least 3 to 4 weeks to coordinate the paperwork between the new bank, your lawyer, and Kāinga Ora.

Are you an existing First Home Partner owner coming to the end of your fixed rates? Don't just roll them over blindly. Reach out to the Home Loan Factory team today to see if a strategic refinance could put thousands of dollars back in your pocket.

Frequently Asked Questions About First Home Partner Refinancing

Q: Do I have to buy out Kāinga Ora's share if I want to refinance my mortgage?

A: No. You can refinance your primary bank mortgage to secure better interest rates or a cashback while leaving Kāinga Ora's shared equity percentage exactly as it is.

Q: Can I refinance a First Home Partner loan to any bank in New Zealand?

A: No. You can only refinance your mortgage to an officially approved "Participating Lender" under the First Home Partner scheme (such as Westpac, BNZ, SBS, or Kiwibank). Non-participating banks will not accept the shared-ownership title structure.

Q: Will Kāinga Ora let me borrow extra money (top-up) when I refinance?

A: Generally, Kāinga Ora requires you to seek their formal consent for any "further lending." Because their goal is for you to pay down debt and eventually buy out their share, they will only approve top-ups if your financial adviser can prove you have the strict financial capacity to handle the extra debt without jeopardizing the buyout goal. A straight "dollar-for-dollar" refinance is much easier to process.

Q: Do I get to keep the new bank cashback?

A: Yes. The cash contribution provided by the new bank is yours to keep. After paying your legal fees for the restructure, you can use the remaining funds as you see fit—though putting it toward your mortgage principal or saving it to eventually buy out Kāinga Ora's share is highly recommended.