First Home Loan vs First Home Grant

Date Published: 22 May 2022

Previously, we’ve looked at the difference between First Home Grants and KiwiSaver.  Another often confused, pairing is the First Home Loan (previously known as the Welcome Home Loan) facility and the First Home Grant (previously known as the HomeStart Grant).  They are both run by Kainga Ora but are actually very different.

Details accurate from 22nd May 2022

First Home Loan

Most banks have a very small amount of money available that they can lend to home buyers (of existing homes) with less than 20% deposit.  The First Home Loan allows first home buyers to be able to more easily buy their first home with less than 20% deposit.  They must, however, meet certain criteria.

There are 3 criteria that you generally have to meet:

  • your income can’t exceed a certain amount in the past 12 months
    • $95,000 for 1 applicant and no dependents,
    • $150,000 for 1 applicant and 1 or more dependents (this is new) and,
    • $150,000 for 2 or more applicants
  • you must have at least 5% deposit
  • be a first home buyer

Generally, if you meet the criteria, you can apply for a mortgage through the First Home Loan.  The criteria is slightly stricter than a normal bank but you will get a pre-approval when the main banks are unable to lend.

Which banks offer the First Home Loan?

The suppliers that we work with are Westpac, Co-Operative Bank and SBS. Even though a lot of the criteria is set by Kainga Ora, who underwrite the loan, there is still quite a bit of difference between how each bank assesses the loans. It is important to know that each supplier has it’s own criteria and fees and these can range substantially.

Can I apply for the First Home Loan through a mortgage broker?

Yes, your mortgage broker will submit the application to the correct lender for you, exactly the same as a normal application. 

First Home Grant

The First Home Grant has almost similar the same eligibility which is why it is so often confused with the First Home Loan however the key difference is that there are price caps – maximum purchase price – for the house you buy.  The grant is money that is given by Kainga Ora to first home buyers to help boost their deposit.

Note that you must commit to living in the property for a minimum of 6 months. As this money is a grant, Kainga Ora don’t want to be funding people who are just looking to flick the property quickly. This grant, after all, is to encourage first home buyers into their long-term homes!

The amount that you receive as a grant depends on how long you have been in KiwiSaver; you can see how this gets confusing.  You will receive $1,000 per year that you have been in KiwiSaver (a minimum of $3,000 and a maximum of $5,000).  This amount doubles if you are buying a new home and is per person. In other words, you could receive up to $20,000 if 2 people have both been in KiwiSaver for at least 5 years and are purchasing a new home.

What defines a “new” home or an “existing” home?

A home is new if the Code of Compliance was issued less than 6 months ago and you are buying from the developer (that is, no one has ever owned this property before).

Some traps we have seen people fall into with this is:

  • the developer has had trouble selling the property and so the Code of Compliance was issued over 6 months ago = no longer classed as a new build
  • the developer sold it to someone who is onselling it = no longer classed as a new build

So be sure that you know when the Code of Compliance was issued and who you are buying from.

One scenario we ran into last year was that the government’s KiwiBuild scheme purchased a few properties from a developer and offered them to potential KiwiBuild buyers. The problem was that the properties had been on the market for quite a few months (over 6) and were no longer new properties. In this case, we convinced the banks to make an exception however it was still a stressful time for our clients.

What does 3 years or more of contributions mean?

To be eligible for the First Home Loan and/or the First Home Grant, you must have been contributing to your KiwiSaver for 3 years or more. A few ways people are caught out on this can be:

  • contributing but not the minimum 3%. This often happens to self-employed people who are contributing the standard $20 per week to receive the Member Tax Credit.
    • note that a self-employed person can make a one-off deposit of 3% of their salary. It does not need to come in regular deposits
  • non-earners not contributing. The test for non-earners is 3% of the minimum wage of an adult.

The contributions don’t need to be consecutive. You might have contributed for 2 years in 2009-2010 and then had a contribution holiday. As long as you contributed 3% of your salary in one other year, you will be eligible. Talk to your KiwiSaver provider for confirmation of this.

For First Home Loan, what does the minimum 5% deposit have to consist of?

Let’s assume you are purchasing an $800,000 home in Wellington. You must have $40k to meet the First Home Loan criteria. This can be:

  • from your KiwiSaver first-home withdrawal
  • from your First Home Grant approval/ pre-approval amount,
  • that you have saved in the bank
  • you have already paid towards the property
  • gifted by a close family member

This isn’t a particularly high bar as you can see. A couple who had both been contributing for 5 year could receive $10k from the First Home Grant alone and would only require $30k more to meet the 5% threshold in the example above. Given that they’ve been contributing for 5 years each, most of this would presumably be from the first home withdrawal but could be gifted from the close family member.

Can I still get the First Home Loan and First Home Grant if I have previously owned a home?

Yes, this is possible but you can only receive the First Home Grant (or it’s predecessor the HomeStart Grant) once. So if you received this for your last home purchase, you are not eligible.

You must not also have realisable assets of over 20% of the property purchase value. In the example above, purchasing a $500k property in Wellington, this would mean you could not have realisable assets of over $100k. Realisable assets are:

  • money in bank accounts (including fixed and term deposits)
  • shares, stocks and bonds
  • investments in banks or financial institutions
  • building society shares
  • boats or caravans worth over $5,000
  • other vehicles (such as classic motorbikes or cars that aren’t your usual mode of transport)
  • other individual assets valued over $5,000
  • deposit funds paid to real estate agent.


The First Home Loan is a facility that allows you to have more options when applying for a mortgage with less than 20% deposit.

The First Home Grant is a grant that helps boost the deposit of first home buyers.

Both have the same income criteria.  The First Home Grant has a few additional criteria to do with KiwiSaver and purchase price caps.

Mortgage Lab’s mission is to be the digital town square for financial decision-makers to gain knowledge about their current and future mortgage. Follow us on Facebook and LinkedIn or subscribe to our newsletter to be notified of our latest articles.

Related Articles

Mortgage Deposit: Can I take out a loan to increase my deposit?

As you may know from our other blogs, there are some key levels of deposit that you need to get to in order to buy a new home. The main…

Read More

One of the simplest ways to grow your deposit is KiwiSaver. Below, we take a quick look at how quickly your deposit could grow and the numbers around this. Let’s…

Read More

When you start thinking of owning your first home and considering the steps and challenges involved, it can feel like an impossible goal. There’s no getting around the fact that…

Read More

It happens to almost everyone eventually. You walk into the bank, and ask for an amount of money, either to buy a car, house, or business and the bank declines you. Today…

Read More