Kainga Ora First Home Loan Scheme
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)
Kainga Ora have a number of similarly named schemes and it’s important to be clear on what each of these achieves.
First Home Grant - This was a scheme where you could receive no strings extra money from the government in return for having your Kiwisaver for more than 3 years. This has been stopped since May 2024.
First Home Partner - This was a scheme from Kainga Ora that allowed buyers to buy with a 5% deposit AND Kainga Ora took some ownership in the property in return for providing further deposit. This scheme is paused, possibly cancelled at the time of writing.
First Home Loan - This is the subject of this post and is where you can buy your own home with as little as 5% deposit.
Now that we’re clear on the differences, let’s go through the what the first home loan is and how it can help you.
Who could this help?
Anyone with more than 5% and less than a 20% deposit available to them. Requirements apply, see below.
Does this mean I would have to buy a ‘Kainga Ora Home’, Kiwibuild', or be on a housing subsidy?
No. under this scheme you can buy almost any brand new or existing property if it is a standard residential home. It is not related to any benefits or subsidies offered by Kainga Ora or any other government department.
Why go for a Kainga Ora First Home Loan over a standard low deposit loan?
Typically, if a borrower has less than 20% deposit, a standard bank loan will look something like this.
If the bank’s standard interest rate is 6%, the bank will add an extra 0.25-0.75% onto the loan as they view this loan as riskier compared to those with more deposit. Sometimes there are extra fees that are added to the loan too depending on the bank.
With a Kainga Ora First Home Loan, we can have as little as 5% deposit, but get rates from the bank like someone with a 20% deposit. This can be huge as 0.75% on $500,000 equates to a saving of $3,750 every year for the borrower.
How does this work?
This bit gets a bit technical, so if you’re not interested in that side of things that’s ok.
In short, Kainga Ora act as a guarantor on your loan. In the situation that we are going in with exactly 5% deposit What they are saying to the bank goes something like
‘We guarantee that your borrower will repay the other 15% of the deposit (to bring you up to 20%), if not, we will make sure the bank is covered.’
This is why the Lender’s Mortgage Insurance Fee (LMI Fee) applies as this is insurance for Kainga Ora against this happening. It does not cover you as a borrower.
This all happens behind the scenes at the bank and Kainga Ora - so although we don’t need to get involved in it, it is good to know.
Which banks participate?
Currently we can access the schemes through Westpac, Co-operative, Kiwibank, SBS, and Unity (Formerly NZCU). Although each lender uses the Kainga Ora First Home Loan Scheme, each has their own requirements and some lenders and better for others in different situations.
This is where your adviser’s assistance comes in. We work with all these lenders regularly and can find the best fit for you.
What are the criteria?
If you are unsure if you meet the criteria, definitely speak to an adviser. Even if you’re not there yet, we can at least light up the path forward and see where we can go.
First Home Buyer
To be eligible, we must be a first home buyer or deemed to be in the position of a first home buyer.
If you own Maori land, you are still considered a first home buyer and eligible for the scheme.
If you have owned a home before, it’s best to get approval from Kainga Ora first that they do consider you to be in the same position as a first home buyer. This is known as a second chance buyer.
They view you as a second chance buyer if your deposit and other assets come to less than 20% of the existing property cap for your region.
EG: Existing property cap in Wellington is $750,000. Therefore they could view a second chance buyer as someone with under $150,000 (20% of $750,000) in total assets.
Click here to apply for Kiwisaver withdrawal as a second chance buyer
Income Cap
$95,000 before tax per year for an individual with no children. For everyone else, it’s $150,000.
Do note though, this is based on your IRD summary (see link on how to get this) for the last 12 months. Also note that not all the income on there counts, so if you are close to the limit, do get in touch.
As it is based on the last 12 months, if you have a higher income than the limit but have been studying, taken time off for things like parental leave or extended travel, or only received the pay rise recently, you may still be eligible. There is no limit on what your income will be moving forward. You could earn a million dollars a year today, but if you have earned less than the cap in the last 12 months, you may well still qualify.
This is a very strict limit with no negotiation in our experience. A dollar over the limit means we are over the limit.
Job requirements
The basic part of this is easy.
Have you been in your permanent PAYE job for the last 12 months? - you meet the criteria
If not in your job for the last 12 months, have you been in this industry, or studying to get into this industry for last 24 months? - you meet the criteria
The challenge comes with a mix of self employed, contract work, some study, whether two jobs count as the same industry or not. This is another area where we can add value and guide you through the process and give your application the best chance of approval.
Deposit requirements
We must have between 5% and 19.99% deposit. but what can make up a deposit?
Savings
Kiwisaver - withdrawal requirements
Gifted money from family members
Sale of shares or other assets like extra vehicles or caravans
Under First Home Loan, we must use everything available to us, apart from a small sum for expenses. This means if we have 15% deposit available, we must use almost 15%, we cannot use only 5%.
Residency Requirements
Open to NZ Residents and citizens. You do not need to be a permanent resident, a standard residency is acceptable.
You must, separate from this, also be ordinarily resident in NZ. In short, this means you live in NZ and pay tax in NZ.
Bank Requirements
Each lender has it’s own requirements and ways of assessing your income that are too involved for this blog post. This is where our team come in to make sure we’re going to the right lender for your situation and to guide you through the process.
What are some possible downsides?
Things to be aware of include
There is a 0.5% Lender’s Mortgage Insurance Fee. So if our loan is $500,000, we will pay a $2,500 fee. This is added to the loan and can be repaid over 30 years.
As the criteria can be very specific, there can be more paperwork than a standard loan and they are very particular about how these documents are presented.
Kainga Ora also have requirements over the property type. For example, it can’t be a home and income property, it cant require extensive renovations ($10,000 worth of work maximum). It must be a liveable property form day one, cosmetics aside.
The vast majority of your deposit must be used towards the purchase. Often clients want to do cosmetic renovations after taking possession and this can make it hard to get funds to renovate without going into further debt after buying the home. With a standard loan, it can be possible to keep more funds aside for this purpose.
How can I apply?
Contact one of our team today, or complete the quiz to find out if you are eligible, and how much lending you might be able to achieve.
Although more complex lending products like this can be daunting, we make this process as smooth and easy as possible.
