A 5% deposit sounds like a loophole. It is not — it is a government-underwritten scheme with real rules, and it is the single biggest reason first home buyers get in years earlier than they expected.
How it works
The First Home Loan is underwritten by Kāinga Ora and issued by a limited group of participating lenders — banks, building societies and credit unions, not every lender in the market. Because the Crown carries part of the risk, the lender can accept a deposit as low as 5%.
Loans made under the scheme are exempt from the Reserve Bank's LVR restrictions and from DTI limits. That exemption is what makes a small deposit possible at all.
What you have to meet
- Income caps apply — one figure for a single buyer, a higher one for two or more buyers. Check the current numbers before you plan around them.
- You must be a first home buyer, or have second-chance status.
- You must live in the home. No investment properties.
- A one-off Lender's Mortgage Insurance premium (around 0.5% of the loan) is charged, usually added to the loan.
- You still have to pass the lender's own credit and affordability assessment. The scheme removes the deposit barrier, not the income one.
The honest trade-off
With 5% down you borrow more, so you pay more interest over the life of the loan, and you carry very little equity. If prices dip, you can go underwater — uncomfortable if you need to sell in a hurry.
The counter-argument is real too: waiting three more years to reach 20% means three more years of rent, and the target moves if prices rise. Neither answer is universally right. Run both.
Run the numbers on both
Use the deposit goal tool to see 5%, 10% and 20% side by side, then the repayments tool to see what each one costs per fortnight.
How to apply
You apply through a participating lender or a mortgage adviser who works with one, not through Kāinga Ora directly. Say up front that you want to be assessed for a First Home Loan — not every front-line lender raises it themselves.
The short version
- 5% deposit, underwritten by Kāinga Ora, only via participating lenders.
- Exempt from LVR and DTI limits — that is the whole point.
- Income caps apply, plus a ~0.5% insurance premium.
- Ask for it by name; not every lender offers it unprompted.
General information for New Zealand first home buyers, not financial or legal advice. Rules and lender criteria change — check anything important with your solicitor, your lender or a mortgage adviser. Sources: Kāinga Ora — First Home Loan; Reserve Bank of New Zealand — LVR/DTI exemptions.