The Kāinga Ora First Home Loan: How to Buy with 5% Deposit
So, you don’t have a 20% deposit? With Kainga Ora, you don’t need one!
In a market where a standard deposit on a median-priced home can feel like a distant dream, the Kāinga Ora First Home Loan is the shortcut many Kiwis are looking for.
Instead of the usual 20%, this government-backed scheme allows eligible buyers to get into a home with just a 5% deposit. Here’s how it works.
Do You Qualify? (The Income Caps)
To keep the scheme focused on those who need it most, there are strict income limits based on your previous 12 months of earnings:
Solo buyer (no dependents): $95,000 or less before tax.
Sole buyer (with dependents): $150,000 or less before tax.
Two or more buyers: $150,000 or less combined before tax.
The "Catch" You Need to Know About
While a 5% deposit sounds awesome, there are a few cons:
Lender's Mortgage Insurance (LMI): You will likely need to pay a 1.2% LMI premium. The good news? Most lenders allow you to add this to the loan so you don't need the cash upfront.
Owner-Occupied Only: This isn't for investors. You must live in the house as your primary residence.
Limited bank options: Not every bank offers this. You have to go through specific providers like Westpac, Kiwibank, SBS, or The Co-operative Bank.
Why It’s a Strategic Move
The biggest advantage isn't just the low deposit; it's the interest rates. Typically, if you have less than 20% deposit, banks hit you with a "Low Equity Margin" (higher interest rates). Because Kāinga Ora underwrites these loans, many participating banks offer you their standard "special" rates, the same ones they give to people with a full 20% deposit.
This can save you thousands in interest every single year.
