First home buyer glossary: home loan terms in plain English
This glossary explains 40 words first home buyers meet in New Zealand, in plain English. Each term links to the page that explains it in more detail.
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The terms, A to Z
Auction
A sale where buyers bid in public. A winning bid is unconditional, so there is no finance condition to fall back on. Lenders may want property details before you bid. KiwiSaver cannot be used for the deposit paid on the day, though it can go towards settlement. Many buyers ask a home loan specialist about finance for that property before bidding. Pre-approval
Builder's report
A report by a building inspector on a property's condition, covering things like the roof, the structure and moisture. It is usually paid for by the buyer, and often sits as a condition in an offer. It does not replace the LIM. The two tell you different things about the same property. Costs beyond the deposit
Cashback
Money a lender pays after a home loan starts, often around $5,000 for first home buyers. It usually comes with a clawback if the loan leaves within a set number of years. Offers change often, so the terms matter, and so does the interest rate, not only the cashback. Your first home deposit
Clawback
A rule that makes you hand back some or all of a cashback if you repay or move your loan early, within the time the lender sets. Usually three or four years. It can also mean the commission a lender takes back from a broker. The clawback terms are part of any cashback offer. Your first home deposit
Conditional approval
A lender's yes that still depends on conditions being met. Pre-approval is conditional: it depends on the property passing the lender's checks and your finances staying the same. Approval of a specific property usually needs a valuation and insurance. It becomes unconditional only when the lender signs off and the conditions are satisfied. Pre-approval
Conveyancing
The legal work of transferring a property from the seller to you. Your lawyer checks the agreement and the title, reads the LIM, deals with the other side's lawyer, and handles the money on settlement day. It is a cost on top of the deposit, so ask for a quote before you commit. Costs beyond the deposit
Credit report
A record of your borrowing history: loans, cards, repayments, defaults and credit checks. Three companies hold credit data in New Zealand: Centrix, Equifax and Experian. You have a right to a no-cost copy from each. Lenders look at it when you apply, which is why many people read theirs early. Credit history and your first home
Debt-to-income (DTI)
Your total debts compared with your gross household income. Under the Reserve Bank rule, banks can only lend a limited share of new loans, about 20%, when total debt is above 6 times income. Student loans, car loans and credit card limits can all count. The First Home Loan is reported to be exempt from the Reserve Bank's deposit and debt-to-income limits. How much can I borrow?
Default
A credit record that a debt of $125 or more was overdue by 30 days or more and the lender took steps to recover it. It stays on your credit file for 5 years, even after you pay it. Paying it off still matters, because lenders can see it was settled. Credit history and your first home
Deposit
The part of the purchase price you put in yourself. The rest is usually borrowed. Savings, a gift and a KiwiSaver withdrawal are common sources. Lenders compare your deposit with the price. 5% is the First Home Loan level, and 20% is the usual bank level. Your first home deposit
Equity
The part of a home you own outright: its value minus what you still owe on the mortgage. If a home is worth more than your loan, the difference is your equity. A deposit is your first equity. Low-equity premiums usually fall away once your equity reaches 20% of the value. Your first home deposit
Finance condition
A clause in an offer saying the sale only goes ahead if you get a loan on terms you accept, by a set date. It protects you if the lender says no. Auctions usually have no finance condition, which is why finance is arranged before bidding. Your lawyer explains the wording and the dates. Finance conditions
Financial statements
Reports that show how a business is doing, usually a profit and loss statement and a balance sheet, ideally prepared by an accountant. Self-employed buyers are generally asked for them, often for about 2 years, alongside tax returns, to show that income is steady. Self-employed first home buyers
First Home Grant
A government payment for first home buyers. New applications closed on 22 May 2024. Nothing replaced it as a cash grant. The First Home Loan and the KiwiSaver first-home withdrawal are what remain. Pages that still list the grant are out of date. What happened to the grant
First Home Loan
A Kāinga Ora scheme that lets eligible first home buyers buy with a 5% deposit. Participating lenders make the loan and Kāinga Ora underwrites it. Income caps apply. Some lenders charge a low equity fee or premium. Ask the lender what applies to you. The First Home Loan
Fixed rate
An interest rate that stays the same for a set period, such as a year or two, so your repayments stay the same too. When the period ends you choose a new rate and term. Moving off it early can cost money. Rates differ between lenders, and early repayment costs vary too. Repayment calculator
Floating rate
An interest rate that can change at any time, so your repayments can go up or down. It is usually higher than fixed rates, and it lets you pay extra or repay in full without the break costs a fixed loan can have. Many loans split between fixed and floating parts. Repayment calculator
Gifted deposit
Money given to you, usually by family, to go towards your deposit. A lender may ask for a letter from the giver saying it is a gift, not a loan, and may want to see where the money came from. A gift can sit beside savings and KiwiSaver. A gifted deposit
Guarantor
Someone, often a parent, who agrees to be responsible for part of your loan if you cannot pay. It may reduce the deposit a lender asks for, but it puts the guarantor's own home or money at risk. Independent legal advice is usual for a guarantor before signing. Buying with friends or family
Interest-only
A loan where your repayments cover only the interest, so the amount you owe does not go down. Lenders usually allow it for a limited time. It can lower repayments for a while, but it costs more overall. Repayment calculator
Joint tenants
A way of owning a home together where everyone owns the whole. If one owner dies, their share passes automatically to the surviving owners, not to their will. Couples often choose it. Friends often choose tenants in common instead. Your lawyer explains which suits you. Buying with friends or family
Kāinga Ora
The government housing agency. For first home buyers, it runs the First Home Loan scheme, assesses previous owners who want to use the KiwiSaver first-home withdrawal again, and publishes data on the scheme. It does not lend the money itself. Participating banks and other lenders do. The First Home Loan
KiwiSaver first-home withdrawal
A way to take your KiwiSaver savings out for a first home. You need at least 3 years of membership, and $1,000 has to stay in the account. It usually takes about 10 to 15 working days. Funds go to your lawyer's trust account, not to you. KiwiSaver withdrawal
LIM
A Land Information Memorandum: a council report on a property. It shows things like building consents, notices and known hazards that the council holds on file. The council charges a fee and takes some working days. Your lawyer reads it with you, ideally before you go unconditional. Costs beyond the deposit
Loan-to-value ratio (LVR)
Your loan as a share of the home's value. A 20% deposit means an LVR of 80%. The Reserve Bank limits how much new lending banks can do above 80% LVR, now 25% for owner-occupiers. It applies to each bank's lending overall, not to each borrower. Your first home deposit
Mortgage
A loan secured against a property. If repayments stop, the lender has legal rights over the home. For most first home buyers it is the biggest debt they take on. The mortgage runs for a term of many years and is repaid in regular instalments. The buying process
Mortgage adviser
A professional who helps you apply for a home loan, also called a mortgage broker. Home loan specialists are usually paid a commission by the lender. This site refers you to one. It does not give advice itself. Do I need a broker?
New build
A newly built home, often treated differently by lenders and by the Reserve Bank's lending limits. Some lenders will look at a 10% deposit on a new build. What counts as new, and what a lender asks for, varies, so check with your lender before you assume a home qualifies. New builds and deposits
Official Cash Rate (OCR)
The interest rate the Reserve Bank sets, which shapes what banks charge for loans. It is reviewed through the year, and fixed mortgage rates tend to move ahead of it as banks expect changes. The Reserve Bank's current OCR
Pre-approval
A lender's conditional indication of how much it may lend, before you have found a home. It usually lasts 90 days, but it pays to check with your lender. It depends on the property passing checks and your finances staying the same. It is not a final loan, and it is not a promise to lend. Pre-approval
Principal and interest
A loan where each repayment pays some interest and some of the amount you borrowed, called the principal. Over time the balance falls to zero. Early on, most of each payment is interest. It is the type of loan the repayment calculator shows. Repayment calculator
Rates (council rates)
A yearly charge from your local council on your property. It pays for local services. The amount depends on the property, and councils raise rates each year. A lender includes it in your costs, and your lawyer adjusts it on settlement day. Many buyers ask for the figure on a property before offering. Costs beyond the deposit
Serviceability
Whether your income can cover your loan repayments and living costs, including a buffer if rates rise. Lenders test it with their own rules. Debts, dependants and spending all count. This site does not say whether anyone can afford a loan. A home loan specialist looks at your real numbers. How much can I borrow?
Settlement
The day ownership passes to you. Your lender pays out the loan, your lawyer sends the money to the seller's lawyer, and you get the keys. Your KiwiSaver withdrawal and deposit are in your lawyer's trust account before then. The date is set in the agreement. The buying process
Student loan repayment
Money taken from your pay for your student loan once you earn over the threshold: 12% of every dollar over $24,128 a year for the 2026 tax year. Lenders count the repayment, and the balance can count towards debt-to-income. A student loan does not rule you out. First home with a student loan
Tenants in common
A way of owning a home together where each owner holds a share, which can be equal or unequal. Each owner decides who inherits their share, and can sell it, subject to your agreement. It suits friends who put in different amounts. Lawyers often suggest a written co-ownership agreement. Buying with friends or family
Term (loan term)
The number of years over which a home loan is set to be repaid, usually many years. A longer term lowers each repayment but means more interest overall. It is different from the fixed period, which is how long an interest rate is locked in. The calculator shows how different terms change the repayment. Repayment calculator
Unconditional
An offer or approval with no conditions left to meet, so the sale is binding. Once an offer goes unconditional, you are committed to buy, and the deposit is at risk if you cannot settle. Many buyers make sure the finance condition, building report and LIM are done first. The checklist covers it. Going unconditional checklist
Valuation
An independent estimate of what a property is worth, which a lender may order before it approves a loan. If the valuation comes in below the price, the lender may lend less. It is usually a cost to the buyer. A valuation is different from a builder's report and from the LIM. Costs beyond the deposit
Common questions
What is the difference between pre-approval and unconditional approval?
Pre-approval is a lender's conditional indication before you have found a home. Unconditional approval comes later, for a specific property, once the lender has signed off and the conditions are met. Only the second means the loan is ready to draw.
What does LVR mean?
Loan-to-value ratio: the loan as a share of the home's value. A 20% deposit means an LVR of 80%. Lenders and the Reserve Bank both use it, and a higher LVR can mean extra cost.
Which of these words matter most before an offer?
Finance condition, unconditional, LIM and settlement are the ones that decide what a buyer is committed to and when. A lawyer explains the exact wording in an agreement before it is signed.
Is a term here the same at every lender?
The ideas are the same, but the details differ. Pre-approval length, cashback terms and low equity premiums all vary by lender, and a lender or home loan specialist can say how a term applies to a particular loan.
Is this glossary advice?
No. It explains words in general terms and doesn't tell anyone which loan, lender or structure to choose, but a home loan specialist can talk through your own situation.
Figures as at 5 October 2026
Sources: Kāinga Ora: First Home Loan; Sorted: credit reports; Kiwibank: KiwiSaver and your first home; IFAA: buying your first home in 2026.
Reviewed against Kāinga Ora, Sorted, Kiwibank and IFAA. This page is general information, not advice, and Online Mortgages is a referral service, not a lender.