Kāinga Ora First Home Loan: The Complete Guide for First Home Buyers in New Zealand

But like most things in the world of finance, there is more to it than the headline figure. Understanding the full picture - including the income thresholds, property requirements, and some of the lesser-known rules around things like deferred maintenance and retained savings - is essential before you start making offers. This guide covers all of it.

What Is the Kāinga Ora First Home Loan?

The Kāinga Ora First Home Loan is a standard home loan offered through selected New Zealand banks and lenders, with a key difference: it is underwritten by Kāinga Ora - Homes and Communities, the government agency responsible for housing in New Zealand. This government guarantee protects the lender against the additional risk of accepting a smaller deposit, which is why they are able to lend to buyers with just 5% saved up.

It is important to understand that Kāinga Ora does not lend you money directly. Instead, it acts as a guarantor behind the scenes. Your mortgage sits with a participating lender and your day-to-day experience of the loan, including repayments, interest rates, and account management, is handled entirely by that lender. Kāinga Ora's role is essentially invisible once your loan is in place, but its involvement is what makes the whole thing possible.

The scheme is not a grant. You are borrowing money and you will repay it in full, just like any other home loan. What changes is the entry point - instead of needing $120,000 to buy a $600,000 home at 20% deposit, you could get started with as little as $30,000.

Who Can Apply? The Eligibility Criteria

Kāinga Ora sets a clear set of minimum eligibility criteria that all applicants must meet.

To be eligible for a First Home Loan, you must be a New Zealand citizen, permanent resident, or a resident visa holder who is ordinarily resident in New Zealand. You must be a first home buyer, or a previous homeowner who is in a similar financial position to a first home buyer - for example, someone who has gone through a relationship separation and no longer has a stake in property.

You must not own any other property or land at the time of application, with the exception of Māori land. You also need to be committed to living in the property as your primary residence. This is not an option for investment properties - it is designed for owner-occupiers who intend to live in as their main place of residence.

On the employment side, you generally need to have been in your current role for at least 12 months. If you have not been with your current employer for a full year but have worked in the same industry or same type of role for two or more years, that can be taken into account. If you have recently started a new role within the last 90 days, your lender will want to see your employment contract and confirm there is no 90-day probationary clause that could put your income at risk.

Income Caps: What You Need to Earn (and Not Earn)

The First Home Loan is means-tested. It is designed to help those who have enough income to service a mortgage but don't have a large deposit, not those who are simply choosing not to save one. Income is assessed based on your gross (before-tax) earnings over the previous 12 months, not your current salary.

For a single buyer with no dependants, the income cap is $95,000 per year before tax. For buyers purchasing together - whether couples, siblings, or friends - the combined household income cap is $150,000 per year before tax. If you have dependants, the income threshold is also $150,000.

An important nuance here: the cap applies to the previous 12 months of income, not your current salary. If you have recently received a promotion or pay rise that takes you over the threshold, you may still be eligible based on last year's earnings. Equally, if your income was temporarily elevated last year due to bonuses or overtime, this could affect your eligibility even if your base salary sits well within the limit. A good mortgage adviser will help you calculate this accurately.

There is no minimum income requirement set by Kāinga Ora, but you will still need to demonstrate to your lender that you can comfortably service the loan after all your living expenses are accounted for.

The 5% Deposit: Where Can It Come From?

Your 5% deposit can be made up from a combination of sources. The most common combination is personal savings and a KiwiSaver first home withdrawal. If you have been contributing to KiwiSaver for at least three years, you can withdraw your balance (minus $1,000, which must remain in your account) to put towards your deposit. This can make a meaningful difference to your deposit pot and the two schemes work very well together.

Gifted funds from immediate family members can also form part of your deposit, provided the gift is genuine and not a loan in disguise. It should be noted that however, most banks require at least 5% of your loan to be from your own savings (cash savings or Kiwisaver) to provide evidence of your ability to save funds. If you are receiving a gift, the funds must pass through your own personal bank account before being put towards your purchase, and your lender will require a signed gift letter.

It is also worth knowing that an additional credit check is typically conducted close to settlement, so it is important not to take on any new debt or credit enquiries in the period between approval and settlement day.

The Retained Funds Rule: A Lesser-Known Limit on Your Savings

One aspect of the First Home Loan that surprises many buyers is the rule around retained funds - that is, the amount of savings you are allowed to hold back from your deposit and keep for yourself after purchase.

Under this scheme, you are generally only permitted to retain up to $5,000 of your savings to cover incidental costs such as legal fees and valuation costs. If you want to hold back more than $5,000, you will need to provide evidence - such as quotes - for specific planned expenses. Examples that lenders typically accept include the purchase of a new appliance, maintenance or repair costs, or the installation of a heat pump.

It is worth noting that some lenders apply the $5,000 limit per applicant, while others apply it as a combined cap across all borrowers on the application. This means a couple could potentially retain up to $10,000 with certain lenders, while others would cap the pair at $5,000 combined. Check the policy of your specific lender early in the process.

The intent of this rule is to ensure that buyers are genuinely putting as much of their available funds as possible into the deposit, rather than buying a home with minimal equity while sitting on a healthy savings buffer. If you are aware of the rule in advance, you can plan around it - for example, by timing the purchase of major appliances or arranging for necessary repairs to be quoted before you submit your application.

High-Value Assets: What You May Need to Sell

Closely related to the retained funds rule is the scheme's treatment of high-value personal assets. Under the First Home Loan criteria, you are generally permitted to own one vehicle per person. However, any other assets worth more than $5,000 - such as a caravan, boat, motorbike, or similar - will typically need to be sold and the proceeds put towards your deposit.

This rule is designed with the same logic in mind as the retained funds limit: if you have significant assets at your disposal, the expectation is that those resources should be directed towards your deposit before drawing on the government's underwriting guarantee. If you own items that fall into this category, factor in the time needed to sell them and have the funds clear in your account before you apply.

Property Requirements: Not Every Home Qualifies

The First Home Loan can be used to purchase an existing home or a brand-new turnkey property, but there are specific restrictions on what types of properties are eligible.

Any property must be at least 45 square metres (excluding decks and outdoor areas), though some lenders set the minimum at 50 square metres. Section sizes are capped at 10,000 square metres (one hectare). Cross-lease properties are generally acceptable, while leasehold properties are assessed on a case-by-case basis - the lease must be perpetually renewable, the loan must be repayable before the lease termination date, and lease payments must be factored into your servicing assessment.

Monolithic cladding is not accepted under the scheme unless the property has been re-clad or brought up to building code compliance. This reflects the ongoing risk concerns around certain cladding types in New Zealand that became prominent following the leaky building crisis.

When it comes to new builds, First Home Loan options are usually limited to completed homes or approved turnkey packages, depending on the participating lender's criteria.

A turnkey arrangement generally means you pay a deposit upfront, with the balance due when the home is complete. There are no progress payments during the build, and the home loan is usually drawn down at settlement once the property is complete and the required completion documentation, such as a Code Compliance Certificate, is available.

This structure can work well with a First Home Loan because the buyer is not making mortgage repayments on the new home while it is still being built. This may make it easier to continue paying rent or board during the construction period, provided the buyer still meets the lender's servicing and approval requirements.

The Deferred Maintenance Rule: What It Means for Property Condition

Another aspect that catches buyers off guard is how the scheme handles deferred maintenance - that is, work on a property that needs to be done but has been postponed.

As a general rule, if a building report, registered valuation, or a property's listing materials reveal more than approximately $5,000 to $10,000 worth of deferred maintenance (the exact threshold varies between participating lenders), Kāinga Ora is unlikely to approve the property unless you can provide evidence of a credible repair plan and demonstrate that the costs are being funded.

Where the estimated maintenance falls below the applicable threshold, lenders will typically require quotes to support that figure before proceeding. Deferred maintenance covers a broad range of issues - anything from a deteriorating roof or damaged weatherboards to a faulty hot water cylinder or broken guttering. Anything identified as requiring attention or repair falls into this category.

This rule matters because it helps protect buyers from unknowingly purchasing a property in poor condition with insufficient funds to remedy it. Given that the scheme allows buyers to purchase with minimal equity, properties with significant unresolved maintenance issues represent a compounded risk. Being aware of this rule means you can factor it into your property search - if a building report reveals significant issues, you may need to either negotiate for the vendor to remedy them before settlement, or accept that the property may not be eligible under this scheme.

A registered valuation is required to confirm finance under the First Home Loan, and the valuation report itself must include at least five comparable sales from within the previous six months. If the registered valuation comes in below your agreed purchase price, you will need to cover the difference from your own savings if you choose to proceed.

The Low Equity Premium: Understanding the Cost

Because the government takes on the underwriting risk associated with a low-deposit loan, Kāinga Ora charges a Low Equity Premium (LEP) to the lender. As at 1 July 2025, this fee is set at 1.2% of the total loan amount. This cost is typically passed on to the borrower and can generally be added onto (capitalised into) the loan rather than paid upfront.

On a $550,000 loan, for example, a 1.2% LEP equates to $6,600. While that is a meaningful sum, it compares favourably to the low equity fees charged by banks for standard low-deposit lending outside the scheme, which can range from $500 to $2,000 or more, and to the alternative of waiting additional years to save a larger deposit while property values continue to shift.

A key benefit of the First Home Loan is that, alongside the lower deposit requirement, borrowers can generally access the lender's advertised home loan interest rates, rather than having Low Equity Margins or Low Equity Premiums added as they normally would with standard low-deposit lending.

Which Lenders Participate?

Not all New Zealand banks offer the First Home Loan. As at mid-2026, participating lenders include a mix of banks and non-bank institutions. It is worth speaking with a mortgage adviser to understand which lenders are currently participating, as this can change, and to compare the rates, fees, and specific credit criteria that each lender applies on top of Kāinga Ora's minimum requirements.

Because lenders are permitted to apply their own credit criteria provided they meet Kāinga Ora's minimums, shopping around does matter. One lender may be more comfortable with your specific employment situation or credit history than another, even if both are offering the same government-backed product.

Joint Applications

If you are purchasing with a partner or co-buyer, all parties must be included on the loan application - there is no option for one person to be a silent co-buyer while only one applicant is listed on the mortgage. This applies regardless of how the relationship is defined.

Renting Out the Property: What Happens Next

Once you have purchased under the First Home Loan, you are required to live in the property as your primary residence. You cannot rent it out while the First Home Loan is in place. If your circumstances change and you wish to rent the property down the track, you would need to refinance onto a standard home loan first. The earlier you know this, the better you can plan for it - especially if your medium-term plans include growing a property portfolio.

When the Deposit Barrier Finally Falls

The Kāinga Ora First Home Loan will not suit every buyer in every situation, but for those who have a stable income, a good savings record, and the means to service a mortgage - yet simply cannot accumulate a 20% deposit quickly enough - it genuinely changes the maths of home ownership. The combination of a 5% deposit threshold, KiwiSaver withdrawal eligibility, and government underwriting creates a viable pathway that many first home buyers in New Zealand would not otherwise have.

The key is going in prepared. Understanding the retained funds rule, the deferred maintenance requirements, the asset rules, and the property restrictions before you start searching means you can move quickly and confidently when the right home comes along - without being caught off guard by criteria you did not know existed.

If you are ready to explore whether the First Home Loan is the right fit for your situation, our First Home Loan guide is a great place to start.

If you'd like to know if a First Home Loan could be an option and get help with an application, book a chat with our First Home Adviser here