A buyer asks how a Kāinga Ora First Home Loan works. Which description is accurate?
Correct Answer
A) Participating lenders issue it, underwritten by Kāinga Ora, with a 5% minimum deposit.
Kāinga Ora says First Home Loans are issued by selected banks and other lenders and underwritten by Kāinga Ora, letting lenders make loans with a deposit of only 5%. Kāinga Ora sets the eligibility criteria, while the lender assesses the application and makes the final lending decision.
Why This Is the Correct Answer
The loan comes from a participating lender, backed by Kāinga Ora, and needs a 5% deposit.
Why the Other Options Are Wrong
Option B: Kāinga Ora lends the money directly and needs a 10% minimum deposit.
First Home Loans are issued by selected banks and lenders, and the minimum deposit is 5%.
Option C: It is a government grant toward the deposit that does not have to be repaid.
It is a loan from a participating lender; the separate First Home Grant has closed.
Option D: The Reserve Bank approves each application after the bank has checked affordability.
The participating lender assesses and makes the final lending decision against Kāinga Ora's criteria; the Reserve Bank has no role in approvals.
Background Knowledge for Finance
Source: https://kaingaora.govt.nz/en_NZ/home-ownership/first-home-loan/
Exam Tip for Finance
Kāinga Ora sets the rules and underwrites; the lender lends and decides.
Common Mistakes to Avoid on Finance Questions
- •Thinking Kāinga Ora itself lends the money.
More Finance Questions
What is the current standard LVR (Loan-to-Value Ratio) restriction for owner-occupier residential property purchases in New Zealand?
What is a key advantage of a revolving credit mortgage facility?
When assessing a mortgage application, which factor is typically given the highest priority by New Zealand lenders?
James has been contributing to KiwiSaver for 4 years and wants to withdraw funds for his first home. His KiwiSaver balance is $45,000, but $15,000 consists of government contributions and employer matching. What is the maximum he can withdraw for his house deposit?
What is the main advantage of a table mortgage compared to an interest-only mortgage?
- → What is the maximum amount a first home buyer can withdraw from their KiwiSaver account for a house deposit?
- → What does LVR stand for in New Zealand mortgage lending?
- → What is the key difference between a table mortgage and an interest-only mortgage in terms of monthly payments?
- → A bank checks how much of a borrower's gross income would go on debt repayments. The borrower earns $80,000 a year, already pays $800 a month on other debts, and the new mortgage would cost $2,200 a month. What share of gross income would the repayments take?
- → Sarah earns $80,000 annually and wants to borrow $400,000. What is her debt-to-income ratio?
- → A property is valued at $600,000 and the buyer has a $100,000 deposit. What LVR would this loan represent?
- → Which of the following is NOT typically considered by banks when assessing lending criteria?
- → How long must a KiwiSaver member have been contributing before they can withdraw funds for their first home?
- → Which type of mortgage allows borrowers to make additional payments that can be re-borrowed later?
- → A couple with a combined income of $120,000 wants to buy their first home for $650,000. They have a 15% deposit. What is their LVR?
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