Using KiwiSaver With a Low-Deposit First Home Loan in NZ (2026): How They Work Together

A KiwiSaver first-home withdrawal and a 5% First Home Loan are built to work together: the withdrawal helps fund the deposit, and the government-underwritten loan lets a participating lender accept that smaller deposit. Here is how the two fit, the income caps, and where low-equity margins change the maths.

For many first-home buyers in New Zealand, the deposit is the wall. KiwiSaver does a lot of the work, but on its own it rarely reaches the 20% deposit a bank would usually want. The Kāinga Ora First Home Loan is designed to bridge that gap, and it is built to sit alongside your KiwiSaver withdrawal rather than instead of it. This guide explains how the two work together: who qualifies, how your KiwiSaver counts toward the deposit, the income caps, and how low-equity margins and lender fees change the numbers.

TL;DR: The First Home Loan lets eligible first-home buyers purchase with as little as a 5% deposit, with the loan provided by participating lenders and underwritten by Kāinga Ora.¹ Your KiwiSaver first-home withdrawal counts toward that 5% — the deposit must be made up of your savings, KiwiSaver and any gifts.⁹ Income caps apply ($95,000 single, $150,000 combined), and there is no longer a house price cap.²³

What is the First Home Loan and who qualifies in 2026?

The Kāinga Ora First Home Loan is not a separate pot of money you receive. It is a normal home loan from a participating lender — a bank, building society or credit union — that Kāinga Ora underwrites. That underwriting is what lets a lender accept a smaller deposit than it otherwise would: where a bank might normally require 20%, an eligible First Home Loan buyer can purchase with as little as 5%.¹

To qualify, you generally need to:⁹

• Be a New Zealand citizen, permanent resident, or resident visa holder ordinarily resident in New Zealand.
• Be a first-home buyer, or a previous home owner in a financial position similar to a first-home buyer.
• Have a deposit of at least 5% of the purchase price.
• Meet the income caps (covered below) and satisfy the lender that you can service the loan.

A point worth holding onto from the start: being eligible for a 5% deposit is not the same as a lender approving the loan. The lender still runs its own servicing test — whether your income comfortably covers the repayments at its test interest rate. The First Home Loan changes the deposit hurdle, not the affordability one.

A free KiwiSaver and first-home review can check both sides — your deposit and your servicing — before you start making offers.

How does a KiwiSaver withdrawal fit a 5% deposit purchase?

This is where the two schemes connect. A KiwiSaver first-home withdrawal is, for most buyers, the largest single piece of their deposit, and it counts directly toward the 5% the First Home Loan requires.

To make a KiwiSaver first-home withdrawal you must have been a KiwiSaver member for at least 3 years. You can then withdraw your own contributions, your employer's contributions, the government contributions and the investment gains on all of it — leaving a minimum of $1,000 in the account.⁴ Two slices stay locked: any funds you transferred from an Australian complying super scheme, and the original $1,000 kick-start, cannot be withdrawn.⁴

So a realistic low-deposit purchase is usually a stack of three parts:

1. Your KiwiSaver first-home withdrawal.

2. Your personal savings (and any gifts from family).

3. The First Home Loan lending from a participating lender — the rest of the purchase price.

The first two make up the 5% deposit; the third covers the balance. For a fuller breakdown of how much of your balance is actually withdrawable, see our guide on how much KiwiSaver you need for a house deposit.

Does your KiwiSaver count toward the deposit a lender wants?

Yes — and importantly, the rules treat your KiwiSaver as part of the 5%, not as an extra on top of it. Kāinga Ora is explicit that the minimum 5% deposit must be inclusive of all your savings, KiwiSaver first-home withdrawals, grants and gifts.⁹

That matters for two reasons. First, it means your KiwiSaver withdrawal is doing real work toward the deposit a lender needs to see — it is not sidelined. Second, it means you cannot count your KiwiSaver and assume a separate 5% in cash on top; the 5% is the combined figure. If your KiwiSaver withdrawal is, say, 4% of the purchase price, you only need to find the remaining 1% from savings or gifts to reach the minimum.

Here is how the components stack up against the two main deposit paths.

Building a deposit with KiwiSaver and a First Home Loan

Source: Kāinga Ora First Home Loan and RBNZ LVR settings.¹⁷⁹ Indicative structure only — your lender confirms the exact figures.

The gap between those two minimum-deposit columns is the whole point of the scheme. On most homes, getting from 5% to 20% in savings is years of additional work. The First Home Loan is what lets your KiwiSaver-plus-savings 5% be enough.

Income and price caps: do you fit them?

The First Home Loan has income caps, but no house price cap. The income test looks at your before-tax income over the last 12 months:²

Source: Kāinga Ora First Home Loan eligibility.²

The price side is more open than many buyers expect. There is no longer a house price cap on the First Home Loan — the property price caps that used to apply were removed in 2022.³ In practice that means you can buy at any price, provided you meet the income caps and the lender is satisfied you can service the loan. The real ceiling, then, is not a published cap; it is what your income will service at the lender's test rate.

If your household income sits above the cap, the First Home Loan path is closed, but a standard low-deposit bank loan may still be possible — which is the comparison we turn to next.

First Home Loan vs a standard low-deposit (low-equity) bank loan

You do not have to use the First Home Loan to buy with less than 20%. Banks can and do lend above 80% loan-to-value (a deposit under 20%) on their own books. The difference is in the constraints and the cost.

Under the Reserve Bank's loan-to-value ratio (LVR) restrictions in force as at mid-2025, banks could make no more than 20% of their new owner-occupier lending at an LVR above 80% — that is, with less than a 20% deposit.⁷ This "speed limit" means low-deposit lending is rationed: a bank only has so much room for it, and in tighter periods that room is given to its strongest applicants.

Because the First Home Loan is government-underwritten, it sits outside that quota. An eligible buyer can secure 5%-deposit lending without competing for a slice of the bank's limited high-LVR allowance.⁸

Source: Kāinga Ora First Home Loan eligibility and RBNZ LVR restrictions.¹²⁷⁸ Lender criteria vary — not every lender or product is shown here; confirm current terms with each lender.

Both paths are legitimate. Which fits depends on your income, your deposit size, and what each lender will actually approve.

How low-equity margins and lender fees change the maths

A low deposit usually carries an extra cost on a standard bank loan: a low-equity margin (sometimes called a low-equity premium). This is an addition to the standard interest rate, charged where you have less than a 20% deposit, and it typically falls away once you reach 20% equity.⁸ On a large mortgage, even a fraction of a percent over several years adds up.

The First Home Loan generally avoids this margin, because the low-equity risk is carried by the government underwriting rather than priced into your rate. That can make it the cheaper low-deposit route for buyers who fit the income caps — though it is worth confirming the current fee structure of any First Home Loan product directly with the lender, as terms can change.

A few practical points to weigh up:

• A low-equity margin on a standard loan is not a one-off — it sits on your rate until you build equity, so it affects every repayment in between.
• The smaller your deposit, the larger your loan relative to the home's value, which means more interest over the life of the mortgage regardless of which path you take.
• Lender fees, valuation costs and legal costs apply on either route and are easy to underestimate when you are focused on the deposit alone.

None of this is a reason to wait years for a 20% deposit if a 5% path gets you securely into a home you can service. But it is a reason to compare the total cost, not just the deposit, before you decide.

Putting it together: a low-deposit plan using KiwiSaver

A workable low-deposit plan tends to follow the same sequence. The order matters, because the deposit and the lending have to line up by settlement.

1. Confirm your KiwiSaver is withdrawable. Check you have at least 3 years' membership and identify any Australian-transferred funds that are locked out.⁴ What is left, minus the $1,000 you must leave behind, is your KiwiSaver contribution to the deposit.

2. Add up your 5%. KiwiSaver withdrawal, plus savings, plus any gifts — this combined figure must reach at least 5% of the purchase price.⁹

3. Check the income caps. $95,000 single, or $150,000 with dependants or two-plus buyers combined.² If you fit, the First Home Loan path is open; if not, look at a standard low-deposit loan.

4. Keep building the withdrawable balance while you save. Continuing to contribute — and capturing the annual government contribution where you qualify — adds to the amount you can withdraw. As at mid-2025 the government contribution is up to $260.72 a year when you contribute at least $1,042.86 in the KiwiSaver year,⁵ and the minimum contribution rate is 3% of gross pay (rising to 3.5% from 1 April 2026).⁶

5. Match your fund to your timeline. A deposit you plan to withdraw within a couple of years sits in a different fund profile than one a decade away. We cover this in our KiwiSaver-to-mortgage first-home plan.

6. Line up the withdrawal with settlement. The withdrawal runs through your provider and your solicitor and takes time — see the withdrawal rules and process for the timeline.

For background on what changed when the First Home Grant closed, our guide on what replaced the First Home Grant sets out where the First Home Loan now fits.

Frequently asked questions

Can I use my KiwiSaver as the deposit for a First Home Loan? Yes. Your KiwiSaver first-home withdrawal counts toward the deposit, and the required 5% must be inclusive of your savings, KiwiSaver withdrawal, grants and gifts.⁹ The withdrawal needs at least 3 years' KiwiSaver membership, and you must leave $1,000 in the account.⁴

How small a deposit can I buy with using the First Home Loan? Eligible first-home buyers can purchase with as little as a 5% deposit, with the loan provided by participating lenders and underwritten by Kāinga Ora.¹ The lender still has to be satisfied you can service the loan.

What are the income caps for the First Home Loan in 2026? Before-tax income over the last 12 months must be $95,000 or less for an individual without dependants, $150,000 or less for an individual with dependants, or $150,000 or less combined for two or more buyers.²

Is there a house price limit on the First Home Loan? No. The property price caps were removed in 2022, so there is no house price cap — you can buy at any price provided you meet the income caps and the lender is satisfied the loan can be serviced.³

Is the First Home Loan cheaper than a standard low-deposit bank loan? It can be, because a standard low-deposit loan often carries a low-equity margin on the interest rate that the First Home Loan generally avoids, and the First Home Loan sits outside the bank's high-LVR speed limit.⁷⁸ Compare the total cost and current fees with each lender before deciding.

Do I need extra insurance with a 5% deposit? A 5% deposit means you owe around 95% of the home's value with almost no equity buffer, and the repayments do not stop if your income does. Many low-deposit buyers consider income protection and loan-clearing life or trauma cover as part of the plan. Personalised advice works through what fits your situation.

This article is general information only and is not personalised financial advice. It does not take into account your particular financial situation, goals or needs. Before acting, consider whether it's right for you and seek advice tailored to your circumstances. Craig Smith Business Services Ltd (FSP712931), trading as Smiths Financial, holds a Class 2 licence issued by the Financial Markets Authority to provide financial advice on personal risk insurance, health insurance, general insurance, KiwiSaver and managed funds, and is a member of the Financial Dispute Resolution Service (FDRS). KiwiSaver is a long-term savings scheme; government contributions, contribution rates and withdrawal rules are set by the Government and can change. Figures are correct as at 24 July 2025 — check current rules at ird.govt.nz, kaingaora.govt.nz and sorted.org.nz. Written by Henry Smith, Financial Adviser; reviewed by Craig Smith, Principal Adviser. Last reviewed 24 July 2025.