If KiwiSaver is the first piece of the deposit puzzle, the Kāinga Ora First Home Loan is usually the second. Used together, they are the most common pathway first-home buyers use to get into the market with less than a standard 20% deposit. This article builds on our KiwiSaver 101 guide and works through how the First Home Loan functions, who qualifies, and what the lesser-known second-chance withdrawal option means for buyers who have owned property before.
What the First Home Loan Actually Is
The Kāinga Ora First Home Loan is not a loan from Kāinga Ora itself. Rather, Kāinga Ora underwrites, or guarantees, a portion of your mortgage to a participating lender. This allows that lender to approve a low-deposit loan it might not otherwise approve under standard Reserve Bank loan-to-value ratio (LVR) restrictions. In practice, this means eligible buyers can purchase with as little as a 5% deposit and gain immediate access to that bank’s special rates, rather than the 20% typically required outside the scheme.
Only a limited number of lenders participate. Westpac, Kiwibank, ASB, the Co-operative Bank, SBS Bank, and several smaller building societies and credit unions are among the participating lenders. If your current bank does not offer the scheme, that alone does not disqualify you, but it may mean moving your lending relationship.
Who Qualifies
- You are a New Zealand citizen, permanent resident, or resident visa holder ordinarily resident in New Zealand.
- You are a genuine first home buyer, or a previous owner assessed by Kāinga Ora as being in a similar financial position to a first home buyer (more on this below).
- Your gross income over the previous 12 months sits within the current caps: $95,000 or less for a single buyer without dependants, or $150,000 or less for a single buyer with dependants or for two or more buyers combined.
- You intend to live in the property as your main home. Investment properties, rentals, and holiday homes do not qualify.
- You have at least a 5% deposit, which can be made up of savings, a KiwiSaver withdrawal, gifted funds, or a combination.
Income caps are based on gross earnings over the prior 12 months, not your current salary, and are reviewed periodically. House price caps for the First Home Loan itself were removed in 2022, though your lender will still assess affordability against standard debt-to-income (DTI) rules. Always confirm current settings at kaingaora.govt.nz before relying on any figure.
The Cost of Borrowing with a Low Deposit
Borrowers under the scheme pay a First Home Loan insurance premium to cover the cost of the government underwrite. This premium currently sits around 1-1.2% of the loan value. Kāinga Ora itself does not charge a separate low equity fee on top of this, though your lender’s standard low-deposit lending terms and interest rate loadings may still apply depending on your overall risk profile and their own lending policy.
How KiwiSaver and the First Home Loan Work Together
These are two separate schemes with two separate sets of eligibility criteria, but they are designed to be used together. After three years of KiwiSaver membership, most first home buyers can withdraw their balance (minus a mandatory $1,000 that must remain in the account) to put toward their deposit. There is no upper limit on how much can be withdrawn, and no house price cap applies to the KiwiSaver withdrawal itself.
In practical terms, a couple who have each been KiwiSaver members for three or more years can combine two individual withdrawals with the First Home Loan’s 5% deposit threshold, often bringing a deposit requirement on a $650,000 to $700,000 property down to a level that is realistically achievable through savings and KiwiSaver alone, without needing family gifting.
The First Home Grant, which used to sit alongside these two schemes and provided a cash top-up of up to $5,000 to $10,000 per person, was permanently discontinued from 22 May 2024. If you come across content describing it as still available, treat that as outdated.
Second-Chance Withdrawals: For Buyers Who Have Owned Before
A common misconception is that once you have owned property, you can never access a KiwiSaver first home withdrawal again. That is not always true. Kāinga Ora can assess previous owners as a ‘qualifying previous homeowner’ and approve what is generally referred to as a second-chance withdrawal, provided specific criteria are met.
- You have been a KiwiSaver member for at least three years.
- You no longer own, or hold any share or interest in, any property (ownership of Māori land is excluded from this test).
- You have not previously made a KiwiSaver first home withdrawal.
- Your realisable assets do not exceed 20% of the relevant regional house price cap for an existing property in the area you intend to buy in.
Realisable assets are assessed broadly and include cash and term deposits, shares and managed funds. The net equity in vehicles or other assets not used as your everyday transport. Kāinga Ora is essentially testing whether you are genuinely back in a first-home-buyer financial position, or whether you retained enough from a previous sale that you do not need the concession.
The most common scenario triggering a second-chance application is relationship separation, where someone loses their share of a previously owned property and needs to rebuild toward home ownership from a materially weaker financial position. Other situations include a forced sale or a property lost through financial hardship. Each case is assessed individually by Kāinga Ora, and the outcome depends heavily on the specific numbers involved, so this is genuinely a case-by-case determination rather than a simple checklist.
Why This Combination Matters for Your Readiness
KiwiSaver and the First Home Loan solve different problems. KiwiSaver builds the deposit. The First Home Loan reduces how large that deposit needs to be. Understanding both, and where a second-chance withdrawal might apply to your situation, is a core part of what the NextMove Readiness Score is designed to surface early, before you’re deep into the process and discovering gaps at the worst possible time.
The Bottom Line
The First Home Loan and KiwiSaver withdrawal are two of the most useful tools available to first home buyers in New Zealand, and the second-chance provision extends that access further than many previous owners realise. None of it is automatic, and the criteria are detailed enough that it pays to check your own position against the current rules rather than assume. Get the sequencing and paperwork right, and this combination can bring forward a purchase by years.
Take the Next Step
Not sure how these schemes apply to your situation? Take the NextMove Readiness Score for a free assessment or read our companion guide to KiwiSaver explained if you haven’t already.
You can also reach out directly at info@nextmoveproperty.co.nz and we can point you in the right direction.
References
Kāinga Ora — KiwiSaver first-home withdrawal: kaingaora.govt.nz
Kāinga Ora — Changes announced for home ownership products: kaingaora.govt.nz/news