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 the official scheme criteria and lender-specific checks around property condition, valuation, retained savings, and serviceability - is important before you start making offers. This guide separates official criteria from lender policy.

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. Kāinga Ora says the loan is underwritten by Kāinga Ora, which allows participating lenders to provide loans that would otherwise sit outside their lending standards.

It is important to understand that Kāinga Ora does not lend you money directly. Instead, it underwrites the loan 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: eligible buyers may be able to use a 5% deposit instead of the 20% deposit many lenders otherwise require.

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.

Participating lenders assess employment stability, income evidence, debts, credit history, and serviceability. The exact employment-history rules can vary by lender, so check the lender's current criteria before relying on a pre-approval.

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 your income has recently changed, your previous-12-month income record may matter more than your current base salary alone. Check the current Kāinga Ora criteria and ask a participating lender or adviser how they will assess your evidence.

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, provided you meet KiwiSaver withdrawal rules and the participating lender accepts the source of funds.

Kāinga Ora says the minimum 5% deposit can include savings, eligible first-home withdrawals, gifts, and grants where applicable. Participating lenders may ask for evidence of genuine savings, source of funds, and any gift documentation.

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.

Some participating lenders may have policies about retained savings and available funds after settlement. Treat these as lender-specific checks rather than fixed public Kāinga Ora rules.

Check the policy of your specific lender early in the process, because retained-funds treatment can vary between lenders and applications.

Because retained-funds treatment is not a single public Kāinga Ora rule, ask the participating lender how it treats savings held back for moving costs, repairs, appliances, emergency funds, or settlement costs before you rely on those funds.

High-Value Assets: What You May Need to Sell

Some participating lenders may also ask about high-value assets when assessing your overall financial position. Treat asset treatment as a lender-specific policy check rather than a fixed public Kāinga Ora rule.

Because high-value-asset treatment is lender-specific, do not assume a fixed Kāinga Ora threshold applies. Ask the participating lender what asset evidence, sale expectations, or exceptions it applies before you rely on an approval.

Property Requirements: Not Every Home Qualifies

The First Home Loan can be used for a property that meets Kāinga Ora criteria and the participating lender's criteria. Kāinga Ora also says some participating lenders may allow you to build a new home with a First Home Loan, subject to that lender's criteria.

Kāinga Ora public criteria include that the property must be under 1 hectare and bought as your primary residence. Participating lenders can apply additional property, valuation, tenure, and condition criteria, so check those criteria before making an offer.

Some property types or condition issues may be harder to finance through a participating lender. Check lender criteria, insurance availability, valuation comments, and legal advice before relying on any specific property.

When it comes to new builds or construction, check the participating lender's current criteria before assuming the structure, contract type, or completion stage will be acceptable.

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.

A turnkey structure may suit some buyers because the main loan is usually drawn at settlement, but availability and servicing treatment depend on the participating lender's criteria and the specific contract.

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.

If a building report, registered valuation, or listing material identifies deferred maintenance, lenders may ask for quotes, a repair plan, or evidence that the costs can be funded. The exact treatment varies by lender and property.

Deferred maintenance can cover a broad range of issues, from a deteriorating roof or damaged weatherboards to a faulty hot water cylinder or broken guttering. A participating lender may ask for quotes or may decline a property if condition issues do not fit its criteria.

Property-condition checks matter because a low-deposit buyer may have less spare equity for urgent repairs after settlement. If a building report reveals significant issues, get lender, legal, insurance, and adviser input before relying on a First Home Loan approval for that property.

A participating lender may require a registered valuation and will apply its own valuation criteria. If the valuation is lower than the agreed purchase price, the buyer may need extra funds or a revised finance structure 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 Lender's Mortgage Insurance premium to the lender. Kāinga Ora describes this premium as 1.2% of the loan amount, which can be paid upfront or added to the loan.

On a $550,000 loan, for example, a 1.2% Lender's Mortgage Insurance premium equates to $6,600. Compare the total interest, fees, premium treatment, and lender criteria before deciding whether this pathway suits your situation.

Kāinga Ora says each participating lender has its own interest rates and fees, and one of those fees reimburses the lender for the Lender's Mortgage Insurance premium Kāinga Ora charges. Ask the lender how rates, fees, and the premium apply to your loan.

Which Lenders Participate?

Not all New Zealand banks offer the First Home Loan. The participating-lender list can change, so check Kāinga Ora's current list and ask lenders or an adviser about rates, fees, and the specific credit criteria 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, the combined income cap and lender credit assessment can apply across the buyers. Ask the participating lender and your lawyer how all purchasers, borrowers, ownership shares, and relationship arrangements need to be documented.

Renting Out the Property: What Happens Next

The First Home Loan is for a home you buy to live in as your primary residence. If your circumstances change, speak to your lender before renting out the property or changing the loan structure.

When the Deposit Barrier Finally Falls

The Kāinga Ora First Home Loan will not suit every buyer in every situation, but for eligible buyers who meet Kāinga Ora criteria and a participating lender's credit criteria, it can reduce the deposit barrier. The combination of a 5% deposit threshold, KiwiSaver withdrawal eligibility, and Kāinga Ora underwriting may create a pathway that would otherwise be unavailable.

The key is going in prepared. Understanding official criteria and lender-specific checks before you start searching can reduce the risk of being caught out by income, deposit-source, retained-funds, asset, valuation, condition, or property criteria later.

If you want to explore whether the First Home Loan may be available for your situation, start with the official Kāinga Ora criteria and then speak with a participating lender or adviser.

If you'd like help understanding whether a First Home Loan could be an option and how a participating lender may assess your application, book a chat with our First Home Adviser here