First Home Loan vs Standard Mortgage NZ — What's the Difference?

If you’re a first home buyer, you have two main mortgage paths: the Kāinga Ora First Home Loan (5% deposit) or a standard bank mortgage (typically 20% deposit, or 10% with rate premium). Understanding the real differences helps you decide which is better for your situation.

Side-by-Side Comparison

Feature	First Home Loan	Standard Mortgage
Minimum deposit	5%	20% (standard) / 10% (new build or low-equity)
Rate premium for low deposit?	No	Yes (0.25–0.75% if <20%)
Income cap	$95,000 single / $150,000 combined	None
Property price cap	Yes (varies by region)	None
Property type	Any (existing or new build)	Any
Who provides it	Banks (with Kāinga Ora guarantee)	Banks directly
Ownership requirement	First home only	Any buyer
Mortgage rate	Same as standard	Standard
Available through brokers?	Yes	Yes

The Key Advantage of the First Home Loan

The First Home Loan’s main advantage is combining a 5% deposit with no rate premium. Without this scheme:

A 5% deposit on an existing property is generally unavailable from NZ banks
A 10–15% deposit incurs a low equity rate premium (0.25–0.75%)

The rate premium matters. On a $600,000 mortgage, a 0.5% rate premium over 2 years costs: $600,000 × 0.5% × 2 years = $6,000

The First Home Loan eliminates this cost entirely, funded by the government guarantee from Kāinga Ora.

What the First Home Loan Doesn’t Change

The First Home Loan is provided by the same banks as standard mortgages — ANZ, ASB, BNZ, Westpac, Kiwibank. The lender:

Still assesses your income and serviceability
Still applies DTI limits (6× income)
Still assesses the property
Still sets your interest rate in line with their standard rates

The Kāinga Ora guarantee is behind the scenes — it covers the lender’s risk between 80% and 95% LVR, but you don’t interact with Kāinga Ora directly in most cases.

When a Standard Mortgage Is Better

You don’t qualify for the First Home Loan (income above caps, property above price caps) — your only choice is standard.

You have a 20%+ deposit — the First Home Loan’s main benefit (no rate premium on low deposit) doesn’t apply if you already have 20%. A standard mortgage is equally competitive.

You’re buying a property above the price cap — First Home Loan price caps in major centres can be limiting. In Auckland, the cap for existing homes may be lower than the median sale price in many desirable suburbs.

When the First Home Loan Is Better

Your income qualifies and the property is within the price cap — the First Home Loan clearly wins for low-deposit buyers. 5% deposit with no rate penalty is significantly better than 10% deposit with a rate penalty.

You’re buying a new build — Kāinga Ora’s price caps for new builds are higher than for existing properties, making the First Home Loan more accessible for new build purchases.

You want to buy sooner — if you have 5–10% saved and the income to qualify, the First Home Loan lets you buy now rather than saving to 20%.

Example: Saving vs Buying Now

Scenario: Couple with $90,000 combined income, $35,000 in KiwiSaver, $15,000 savings = $50,000 total.

First Home Loan:

Can purchase up to $1,000,000 (at 5% deposit), but price cap may apply — say, eligible for a $700,000 property in their area
5% deposit = $35,000 — they have it (using KiwiSaver + savings = $50,000, buying costs ~$10,000)
Can buy now at $700,000

Standard mortgage path:

Need 20% deposit on $700,000 = $140,000
Currently have $50,000
Need to save another $90,000
At $3,000/month savings = another 30 months (2.5 years)
In that time, a $700,000 property may have appreciated to $770,000+ — requiring even more deposit

Combining First Home Loan with KiwiSaver

The First Home Loan is designed to work alongside KiwiSaver first home withdrawal. Most first home buyers using the First Home Loan use their KiwiSaver balance as the primary source of the 5% deposit.