First Home Buyer Guide NZ — Everything You Need to Know

Buying a first home in New Zealand is the largest financial transaction most people ever make. The process is not straightforward. The deposit requirement, mortgage approval, KiwiSaver withdrawal rules, and government schemes create a maze that is easy to get lost in. This guide walks through each stage in the order you will encounter it.

The Deposit

Most lenders prefer a deposit of at least twenty percent of the purchase price. Below that, the loan falls into high-LVR (loan-to-value ratio) territory, which means the lender needs to hold more capital against it. They still lend at lower deposits, but the rates may be higher and the approval criteria stricter.

The First Home Loan, underwritten by Kāinga Ora, is the main government-backed option for buyers with a smaller deposit. It allows eligible buyers to purchase with as little as five percent deposit. To qualify, your income must be below a set threshold — a limit that changes periodically — and the property price must fall within regional caps. The loan is available through participating banks and lenders. Because the government underwrites the risk, the interest rate is typically the lender's standard rate rather than a premium low-deposit rate.

What counts as a deposit includes savings you have built up, your KiwiSaver first-home withdrawal, and gifted funds from family. A gift letter confirming the money does not need to be repaid is required. Sale proceeds from another asset also count. Lenders look for genuine savings — money you have accumulated over time rather than money that appeared in your account last week.

KiwiSaver First-Home Withdrawal

If you have been contributing to KiwiSaver for at least three years, you can withdraw most of your savings to put toward your first home. The withdrawal is processed through your scheme provider. You need to request a eligibility letter from Kāinga Ora confirming you meet the criteria — this is a simple online application.

The amount you can withdraw includes your contributions, your employer's contributions, and the government contribution. Investment earnings on those contributions are also available. The one part you cannot withdraw is the NZ$1,000 kickstart if you received it when you joined — that stays in your account until retirement. The remaining balance is available, subject to the minimum withdrawal amount and the property purchase price.

Using your KiwiSaver as part of the deposit reduces the amount of cash savings you need. It does not eliminate the deposit requirement — you still need enough to reach the lender's minimum deposit level, whether that is five percent through the First Home Loan or a higher amount through a standard mortgage.

Understanding Mortgage Approval

Banks assess your ability to repay based on your income, your expenses, and the test interest rate — which is higher than the actual rate, designed to ensure you can still afford payments if rates rise. The assessment uses your declared living expenses or a benchmark amount set by the bank, whichever is higher.

Pre-approval gives you a clear picture of your borrowing capacity before you start looking at properties. It is not a guarantee of funding — the bank still evaluates the specific property before final approval — but it means the main financial hurdle is cleared. Most real estate agents and vendors take a pre-approved buyer more seriously than one still organising finance.

Fixed versus floating is the first mortgage structure decision. Fixing a portion of the loan for one to five years gives certainty about the interest rate for that period. Floating gives flexibility to make extra repayments without penalty. A common approach is to fix most of the loan and keep a small portion floating so you can make lump-sum payments when you have extra cash.

The Transaction Costs

Beyond the deposit, buying a home involves other costs. A registered valuation, building inspection, and lawyer's fees add up. Moving costs, connection fees for utilities, and any immediate repairs or furnishings also need to be budgeted. Having a buffer of several thousand dollars beyond the deposit covers these expenses without putting pressure on your savings.

The process takes longer than most first-home buyers expect. From pre-approval to settlement is typically several months. Finding the right property, negotiating, going through due diligence, and waiting for the lender to complete the final approval all take time. Planning for a six-month timeline from starting the process to moving in removes the stress of unrealistic expectations.

The First Home Loan Vs Saving a Full Deposit

The trade-off between buying sooner with a five percent First Home Loan deposit and waiting to save a twenty percent deposit is a genuine financial decision. Buying sooner means entering the market earlier, building equity through capital gains and mortgage repayments, and paying rent for less time. The downside is a larger loan amount and higher fortnightly or monthly repayments, plus the Lenders Mortgage Insurance premium of just over one percent of the purchase price that the First Home Loan requires.

Buying later with a larger deposit means lower repayments, no LMI, and a wider choice of lenders. The calculation depends on house price growth in your area. If prices are rising faster than you can save, buying earlier with a smaller deposit wins. If the market is flat or falling, saving the full deposit is safer. No one can predict short-term house price movements, so the decision comes down to your personal financial stability and how long you plan to own the home. First home buyers who plan to stay for at least five years are less exposed to short-term price fluctuations regardless of which deposit path they choose.

Working With Professionals

A mortgage broker compares loan options across multiple lenders at no cost to you — their commission is paid by the bank. A broker can tell you which lenders are most likely to approve your application based on your specific circumstances and which ones have the lowest rates for your deposit level. Using a broker does not prevent you from also approaching banks directly, and some buyers do both to ensure they have explored all options.

A solicitor handles the legal side of the purchase: reviewing the sale and purchase agreement, conducting the title search, managing the settlement process, and registering the transfer of ownership. Legal fees vary but are a necessary expense that should be budgeted for alongside the deposit and valuation costs. Using a solicitor who specialises in residential conveyancing makes the process smoother.

A building inspection is optional but strongly recommended. A registered building inspector examines the property for structural issues, weathertightness problems, and other defects that might not be visible during a standard viewing. The inspection report gives you the information to negotiate on price or pull out of the deal if significant issues are found. The cost of an inspection is small compared to the cost of buying a house with hidden problems.