TL;DR:
- The Kāinga Ora First Home Loan allows eligible first home buyers in New Zealand to purchase with a five percent deposit backed by a government guarantee.
- While it offers standard interest rates without a low-equity premium, lenders conduct their own assessments beyond eligibility criteria to approve the loan.
The 5 deposit scheme is a government-backed loan that lets first home buyers in New Zealand purchase a home with just a 5% deposit. Known formally as the Kāinga Ora First Home Loan, it works by having the government guarantee the portion of your loan above 80% loan-to-value ratio, which means you access standard bank interest rates without paying a low-equity premium. The First Home Grant closed permanently in may 2024, so the First Home Loan is now the primary government-backed 5 deposit option available to eligible buyers in 2026. If you have been saving hard but feel the 20% deposit goalposts keep moving, this scheme exists precisely for you.
1. What is the Kāinga Ora First Home Loan and how does it work?
The Kāinga Ora First Home Loan is a government-underwritten mortgage that removes the financial penalty typically charged for low deposits. Normally, banks charge a low-equity margin on loans above 80% loan-to-value ratio. With this scheme, Kāinga Ora guarantees the risk from 80% to 95% loan-to-value ratio, so your lender applies standard interest rates even though you are borrowing 95% of the property value.
The loan itself is issued by a participating bank or lender, not directly by Kāinga Ora. Kāinga Ora acts as a silent guarantor in the background. This means your day-to-day mortgage experience looks and feels like any other home loan.
Key features of the scheme include:
- No lenders mortgage insurance charged to you
- No interest rate loading for the low deposit
- Standard bank rates apply from day one
- Participating lenders include major New Zealand banks and some non-bank lenders
- Property price caps apply and vary by region and property type
- Income limits apply to all applicants
Pro Tip: The scheme is not a grant and does not give you cash. It is a guarantee that makes your low deposit loan cheaper to service over time.
2. Who is eligible for the 5 deposit scheme in 2026?
Eligibility for the Kāinga Ora First Home Loan is defined by income, ownership history, and property price. The income caps are $95,000 for singles and $150,000 combined for buyers with dependents or purchasing with another person. These figures are based on your total income before tax in the 12 months before you apply.
You must also be a genuine first home buyer, meaning you do not currently own property and have not previously owned property in New Zealand. There is a hardship exemption for buyers who previously owned a home but no longer have a financial interest in one, though lenders assess this case by case.
Eligibility requirements at a glance:
- Income: Under $95,000 (single) or $150,000 (combined)
- Ownership history: First home buyer or qualifying hardship exemption
- Residency: New Zealand citizen, permanent resident, or eligible visa holder
- Occupancy: You must intend to live in the property
- Property price: Must fall within the regional price caps for your area and property type
Property price caps are strict. Exceeding the cap for your region disqualifies your application even if every other criterion is met. Caps differ between new builds and existing properties, and between regions like Auckland, Wellington, and the South Island. Always verify the current cap for your target area before making an offer.
3. What counts as your 5% deposit: fund sources and requirements
Your 5% deposit does not need to come from a single source. Lenders accept a combination of funds, provided each source is properly documented.
Accepted deposit sources include:
- Personal savings held in a bank account for at least three months
- KiwiSaver first home withdrawal, which you can access after three years of contributions
- Family gifts that are genuinely non-repayable
The deposit can combine savings, KiwiSaver, and gifts, giving you real flexibility if no single source covers the full 5%. For example, you might use $15,000 from KiwiSaver and $10,000 from personal savings to reach the required amount on a $500,000 purchase.
If part of your deposit comes from a family member, your lender will require a formal gift letter. The gift letter must state explicitly that the funds are non-repayable and are not a loan. Prepare this document before you submit your pre-approval application, not after, to avoid delays.
You must also intend to live in the property. Depending on your lender, the occupancy requirement ranges from 6 to 12 months. This scheme is not available for investment purchases.
Pro Tip: Start your KiwiSaver withdrawal application early. The process through Inland Revenue can take several weeks, and delays can push back your settlement date.
4. Advantages and disadvantages of using the 5 deposit scheme
Buying with a 5% deposit has genuine benefits, but it also carries real financial risks. Understanding both sides helps you make a clear-eyed decision.
Advantages
The biggest benefit is market entry. Property prices in New Zealand have historically trended upward over the long term. Buying sooner means you start building equity earlier, rather than watching prices rise while you save a larger deposit. The Kāinga Ora guarantee waives the low-equity margin, so you do not pay a premium interest rate for borrowing at 95% loan-to-value ratio. That saving is meaningful across a 25 or 30 year loan term.
Disadvantages
A 5% deposit means a 95% mortgage. Your repayments will be higher than they would be with a larger deposit, and you will pay more total interest over the life of the loan. With minimal equity at the start, a fall in property values could leave you in negative equity, meaning you owe more than the property is worth. You also have less financial buffer if your circumstances change.
| Factor | With 5% deposit | With 20% deposit |
|---|---|---|
| Market entry | Sooner | Later |
| Interest rate | Standard (no loading) | Standard |
| Monthly repayments | Higher | Lower |
| Total interest paid | More | Less |
| Equity buffer | Minimal at start | Solid from day one |
| Negative equity risk | Higher | Lower |
The right choice depends on your income stability, your local market, and how long you plan to hold the property.
5. How to apply for the Kāinga Ora 5% deposit loan
The application process runs through a participating lender, not directly through Kāinga Ora. Your lender handles the government guarantee paperwork on your behalf.
Follow these steps to give yourself the best chance of approval:
- Check your eligibility against income caps and regional property price caps before you start
- Gather your documents including payslips, bank statements, proof of deposit, and KiwiSaver balance
- Prepare your gift letter if any deposit funds come from family, with explicit non-repayable wording
- Apply for pre-approval through a participating lender or with the help of a mortgage adviser
- Review your credit history and pay down any high-interest debt before applying
- Confirm the property price cap for your target suburb before making an offer
Meeting Kāinga Ora’s criteria does not guarantee approval. Lenders independently assess serviceability and apply their own credit risk standards. A high debt-to-income ratio, irregular income, or a recent credit default can result in a declined application even when you meet every government requirement. Working with a mortgage adviser who knows which lenders suit low deposit applications can make a significant difference to your outcome.
Key takeaways
The Kāinga Ora First Home Loan is the only active government-backed 5 deposit scheme in New Zealand in 2026, offering standard bank rates with no low-equity premium for eligible first home buyers.
| Point | Details |
|---|---|
| Scheme name | The Kāinga Ora First Home Loan is the active 5% deposit option; the First Home Grant closed in 2024. |
| Income limits | Singles must earn under $95,000; couples or buyers with dependents must earn under $150,000 combined. |
| Deposit sources | Personal savings, KiwiSaver withdrawals, and non-repayable family gifts all count toward the 5%. |
| Property price caps | Caps vary by region and property type; exceeding the cap disqualifies your application. |
| Lender assessment | Meeting Kāinga Ora criteria is not enough; lenders apply their own serviceability and credit checks. |
Stuart’s take: what I have seen buyers get wrong
Most buyers I speak with are surprised to learn the First Home Grant no longer exists. Outdated online content still misleads buyers into expecting cash assistance that was permanently removed in may 2024. The first thing I tell anyone starting out is to ignore anything written before mid-2024 about government housing grants.
The second mistake I see regularly is underestimating how much lenders scrutinise your finances beyond the Kāinga Ora checklist. Passing the income and deposit tests is the floor, not the ceiling. Your spending habits, existing debts, and credit history all feed into a lender’s decision. I have seen buyers with solid incomes declined because their credit card limits were too high relative to their income.
KiwiSaver is genuinely underused as a deposit tool. Many buyers do not realise they can combine their KiwiSaver first home withdrawal with personal savings and a family gift to reach 5% faster than saving alone. Start the withdrawal process early because Inland Revenue processing takes time and a delayed settlement is a stressful situation you can avoid.
Finally, always check the property price cap for the specific suburb you are targeting, not just the region. Caps differ between new builds and existing homes, and between areas within the same city. I have seen buyers fall in love with a property only to discover it sits $20,000 above the cap. That is a heartbreaking and entirely avoidable situation.
— Stuart
How Mortgagemanagers supports your first home purchase
Getting your first home loan approved with a 5% deposit takes more than ticking the Kāinga Ora boxes. Mortgagemanagers works with first home buyers across Auckland and throughout New Zealand to match you with the right participating lender for your situation.
Our mortgage advisers review your income, deposit sources, and credit position before you apply, so you walk into pre-approval with confidence rather than guesswork. We help you prepare gift letters, coordinate your KiwiSaver withdrawal, and verify property price caps for your target area. Whether you are buying in Hobsonville, on the North Shore, or anywhere else in New Zealand, Mortgagemanagers is ready to guide you through every step of the process.
FAQ
What is the Kāinga Ora First Home Loan?
The Kāinga Ora First Home Loan is a government-backed scheme that lets eligible first home buyers purchase with a 5% deposit at standard bank interest rates, with no low-equity premium charged.
Is the First Home Grant still available in 2026?
No. The First Home Grant was permanently closed in may 2024. The Kāinga Ora First Home Loan and KiwiSaver first home withdrawal are the active support options for first home buyers in 2026.
What are the income limits for the 5 deposit scheme?
Singles must earn under $95,000 before tax in the prior 12 months. Couples or buyers with dependents must earn under $150,000 combined.
Can I use KiwiSaver as my 5% deposit?
Yes. KiwiSaver first home withdrawal funds count toward your deposit and can be combined with personal savings or a non-repayable family gift to reach the required 5%.
Why might my application be declined despite meeting the criteria?
Lenders apply their own serviceability and credit risk assessments independently of Kāinga Ora’s rules. A high debt-to-income ratio, poor credit history, or high existing debt can result in a declined application even when all government criteria are met.