To be honest, it’s a little bit confusing as many people think that it’s actually Kainga Ora that are providing the First Home Loan.
But that’s not the case – the home loan is actually provided by one of the banks that are signed up for this program.
Now, I do say one of the banks because not all banks are signed up to it and some of the major ones aren’t which means getting any information from those banks on this can be a little bit problematic. ANZ, ASB, and BNZ do not provide loans through this.
So what actually is Kainga Ora First Home Loan?
In many respects, it’s the way to get around a rule that was introduced by the Reserve Bank. That rule is where they restrict how much lending the banks can do to people that have less than 20% deposit. The Kainga Ora scheme is exempt from those rules, and therefore it was designed specifically to help First Home Buyers that had less than 20% deposit.
If you are eligible you can buy with just a 5% deposit.
It works with the bank to guarantee…
So firstly, it means that the banks that do use Kainga Ora First Home Loans are not restricted by the amount of lending that they can do and that’s a really good thing.
But there is some eligibility criteria that restricts who they can lend to, and you need to be aware of what that is.
The concept also removes the risk from the banks as it is Kainga Ora that guarantee or accept the risk and any losses should that happen due to the low deposit.
However, to help cover this risk, Kainga Ora actually have an LMI fee, which is a lenders mortgage insurance fee to cover of 0.5% of the loan amount to cover the risk. This is similar to having insurance on a house or car – it protects against the financial risk of a loss.
Because you have less than 20% deposit, you will pay the 0.5% LMI fee. It’s a one-off fee that’s added to your loan so you do not need to find that extra money today.
So is it a good idea to use the Kainga Ora First Home Loan?
Yes, it’s a great idea to use it to get into your first home and especially while house prices have been a bit subdued. You want to try to get in at today’s prices rather than waiting a year or two to save a bigger deposit and possibly see those house prices increase as you’re saving.
Yes, you will be charged the 0.5% LMI fee so that is an additional cost to be aware of.
But because the banks that are involved in this do not have the risk that would normally be associated with low deposit lending, many of them are coming up with some pretty good deals for first home buyers. One bank offers a 1.00% discount on the 1-year fixed rate so that covers the LMI fee plus more!
It’s also better than what most banks would offer if they approved a loan that was not done as a Kainga Ora First Home Loan. If you were able to get lending from a bank in the normal course of business, and you had less than 20% deposit, not only would they not give you a special deal, they would more than likely be charging a low equity margin, which is additional interest over and above their normal interest.
What’s Next?
The process for applying for a Kainga Ora First Home Loan is a little bit different.
You should reach out to one of the mortgage advisers that has experience with this to ensure that you get the right advice and to help manage you through that process.
Good adviser know what option is going to suit best and be able to answer all your questions too.
Obviously as a first home buyer everything is going to be new, and having a good adviser will remove much of the stress for you.
They not only be able to arrange the finance for you but they will help you work through the whole process of buying a house.
Even if you think you’re not ready yet, it does no harm to have a quick chat to one of the advisers.
They are free and easy to speak with and will soon point you in the right direction for what you need to do to make sure that you can get as ready as possible, as soon as possible.
As mentioned when you’re buying a first home it can be a real benefit to get into the market early, before prices increase.
You want to get pre-approved so that when you do go shopping for your new home you can move quite quickly when you see the one that is perfectly suited.
Lets book a time to chat
James Puah
Mortgage Manager (Adviser)
As a financial and mortgage advisor, James Puah is here to help you to achieve your financial security and freedom through a tailored strategy to best suit your interests, aspirations and needs. Whether you are buying your first home, a new build, an investment property, looking to re-finance or re-fixing your mortgage, or if you are simply consolidating debt, require commercial lending, business lending, development fund, car loan, insurances, KiwiSaver and/or investments etc, James would love to hear from you and provide an optimum solution to cater to your requirements. James is passionate about finding out more about your financial aspirations and goals so that he can help you head in the right direction. James is multilingual; he is fluent in English, Mandarin and Taiwanese Hokkien.
Stuart Wills
Mortgage Manager (Senior Adviser)
Stuart is based from offices in Hobsonville in Auckland and is known as a comprehensive mortgage adviser who has in-depth knowledge in helping people buy their first homes, helping self-employed people to get a home loan and other finance, help people with new build finance and helping those people that need non-bank finance. Don’t worry if you are not in Auckland as Stuart will work with people throughout New Zealand and overseas too.
Jesica Muliawan
Mortgage Manager (Adviser)
Jesica is a dedicated mortgage adviser with a passion for people and property, committed to helping people navigate the home loan process with confidence. She believes property ownership is a powerful pathway to financial freedom and works closely with her clients to help them build long-term wealth. With a strong background in construction, finance and property, she understands the challenges of securing the right mortgage and ensures her clients receive expert guidance every step of the way.
Nicola Petersen
Mortgage Manager (Adviser)
Nicola has over 20-years experience with property and she believes that getting the home loan approved and set up properly is as important as finding the right home. She loves helping first home buyers, guiding them through all aspects of getting ready to buy, getting the finance pre-approval and of course helping finalise the finance that is required. When she’s not helping first/next-home buyers and investors secure the best home loan deals, she likes to explore the many beaches of Auckland’s Hibiscus Coast and North Shore with her husband and two kids.
Yatin Kainth
Mortgage Manager (Adviser)
Yatin is a dynamic professional who works as a Mortgage Advisor at Mortgage Managers. He is dedicated to providing exceptional support and guidance to his clients, ensuring a seamless and efficient process for getting the home loans approved and then the ongoing management of the loans.
Sunil Kumar
Mortgage Manager (Adviser)
Sunil is a mortgage adviser with experience with first home buyers and existing home owners, but also with extra specialities for helping people that also have income from rideshare platforms and for property investors including arranging finance for boarding houses. He is able to understand and assist a wide range of people in different situations by providing the most ideal mortgage approach. Speaking fluent English, Hindi, Haryanvi, Punjabi and Fijian, Don’t worry if you are not in Auckland as he will work with people throughout New Zealand and overseas as well.
