Being a prospective first home buyer is not easy. Despite a softening market, house prices are still way up there. And inflation and rising interest rates are making it even tougher. But there is still some hope out there and help in the form of government subsidies.
Kāinga Ora – Homes and Communities – was set up in 2019 to get more Kiws into their own homes. It’s a government organisation that brings together KiwiBuild and Housing New Zealand.
First home products
Securing a first home mortgage for an existing home when you have less than a 20% deposit is difficult. Kāinga Ora’s First Home Products are there to help first home buyers overcome the deposit barrier to home ownership. Their first home loans and grants may help you get one step closer to sealing a deal on buying a home.
First home loans and grants
These are both government-run schemes but are quite different.
• First Home Loan – reduces the deposit requirement to 5% for eligible first home buyers.
• First Home Grant –money given by Kainga Ora to first home buyers to help boost their deposits. Eligible first home buyers who have been contributing to KiwiSaver for at least three years can receive up to $20,000 (depending on property type) to put towards a deposit.
First Home Loan
First Home Loans, previously known as the Welcome Home Loan, are loans that first home buyers can use can buy a home with only a 5% deposit. This is because Kāinga Ora underwrites them, so lenders, such as banks, can loan to borrowers who would otherwise be outside their lending parameters.
Borrowers, however, must meet certain criteria which are.
• If you are buying by yourself and have no dependents, your income can’t exceed $95,000 in the past 12 months.
• If you are buying by yourself and have 1 or more dependents, your income can’t exceed $150,000 in the past 12 months.
• If 2 or more applicants are buying together, your incomes can’t exceed $150,000 in the past 12 months.
• You must have at least a 5% deposit. This can be money from your KiwiSaver first-home withdrawal, savings, or gift from family.
• You must be over 18.
• You must not own any other houses or land.
• You must commit to living in the property for at least 6 months. A First Home Loan or grant cannot be used to buy an investment or rental property.
If you meet the criteria, you can apply for a mortgage. The criteria are set by Kainga Ora, but each bank assesses the loans based on its own criteria and fees can vary substantially.
First Home Grant
The First Home Grant has similar eligibility as a First Home Loan, except there are price caps on the house you can buy. The amount that you receive as a grant depends on how long you have been in KiwiSaver, although you are not obliged to use your KiwiSaver savings, and the type of home you’re buying.
• If you buy a new home or land, you can get $2,000 for each of the three (or more) years you’ve paid into Kiwisaver.
• If you buy an existing home, you can get $1,000 for each of the three (or more) years you’ve paid into Kiwisaver.
Each person is eligible to receive $1,000 per year they have been in KiwiSaver. As you must have been contributing for a minimum of 3 years, the minimum you can receive is $3,000 and the maximum is $5,000. This amount doubles if two of you are buying a brand-new home together, as opposed to an existing home: 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 together.
The grant has a cap, a limit on how much you can spend on a home and still be eligible. The capped amount depends on where you want to live and whether the house is an existing home or a new build.
The cap for existing properties ranges from $400,000 to $875,000 (differs for each city or region), and for new builds the range is $500,000 to $925,000. For example, the cap for First Home Grants in the Auckland region for existing & new properties is $875,000 and for new builds in Queenstown-Lakes, the grant cap is $925,000. For more information on caps in the area you want to buy, talk to one of our Global Finance team.
You can still get the First Home Loan and First Home Grant if you have previously owned a home as long as you are in a similar financial position to a typical first home buyer, but you can only receive First Home financial help once.
Help buying your first home
These first home products are likely to help many first home buyers buy their own homes. As always though, having someone on your side to help guide you through the home buying process can really help. Talk to one of our brokers.
Applying for First Home help
We can submit the application to the most suitable lender for you, exactly as we would for a standard loan application. We can give you certainty around eligibility and how much you may qualify for. You can also apply for a grant once you’ve found a property and we can help with that too.
Our mortgage advisers can be your guide, providing expert advice at every step. They can also take away the stress and hassle of putting together an application. As each bank assesses the loans based on its own criteria and has its own fee structures, we can help you find the right lender, and then structure your home loan so that it fits your lifestyle and budget.
If you’re a first home buyer looking for help navigating the property-buying world, Global Finance is here to help.
**These are general guidelines and are by no means a reflection of bank or lending policies