Kāinga Ora’s First Home Loan Scheme

In the current climate of high interest rates, the high cost of living and even higher house prices, the road to homeownership in New Zealand can be challenging, especially when you’re faced with the massive task of saving for a 20 per cent deposit. However, you can get there. Homeownership is being made more achievable for Kiwis through support by Kāinga Ora and their First Home Loan scheme.

Help for First-Home Buyers

Kāinga Ora introduced the First Home Loan scheme to make homeownership more accessible to many first-time homebuyers by lowering the deposit barrier. The First Home Loan scheme can get you one step closer to getting a mortgage so you can purchase your very own home.

First Home Loans: Reducing Deposit Requirements

Typically, most lenders in New Zealand demand a rather substantial deposit of 10-20 per cent before they’ll give you a mortgage. However, Kāinga Ora’s First Home Loan scheme allows eligible first-home buyers to secure a mortgage with a deposit as low as five per cent.

According to Aseem Agarwal, Head of Mortgages at Global Finance, “the standout feature of this scheme is the government’s financial backing. Approved lenders participating in the First Home Loan scheme have the security of a government guarantee.”

Kāinga Ora underwrites the loans. Lenders have the assurance of government support so are more willing to offer you a mortgage even if you have a lower deposit and would otherwise be outside their lending parameters.

Eligibility Criteria

To be eligible for First Home Loans must meet certain criteria which are:

• If you’re buying a home by yourself and have no dependents, your income can’t exceed $95,000 in the past 12 months.
• If you’re purchasing on your own but have one or more dependents, your income can’t exceed $150,000 in the past 12 months.
• If two or more applicants are buying together, your combined incomes can’t surpass $150,000 in the past 12 months.
• You must have at least a five per cent deposit, which can include money from your KiwiSaver first-home withdrawal, cash savings, proceeds from sale of an asset or it can entirely be a gift from a family member.
• You must be over 18 years old.
• You must not own any other houses or land.
• You must commit to living in the property for at least 6 months. The First Home Loan cannot be used to buy an investment or rental property.
• There are no longer price caps on the houses you can buy, but your annual household income still can’t exceed $150,000.

Lower Interest Rates & Cash Back

Because Kāinga Ora removes the bank’s low deposit risk by underwriting the loans, a lower deposit doesn’t equate to a higher interest rate as it would in the open market. This means you’ll have the same interest rate for a 95 per cent loan as you would with a 20 per cent deposit, so you can buy your home sooner without drastically increasing the long-term cost of your loan. The banks also give cash back on the loans to cover the solicitor and valuation costs.

Things to Be Aware of with the Kāinga Ora First Home Loan Scheme

1. Lenders’ Mortgage Insurance (LMI): Under the First Home Loan scheme, you pay slightly more for your mortgage due to Lenders’ Mortgage Insurance. This is 0.5 per cent of the loan. For example, if you borrow $200,000, you’ll pay a one-off $1,000 fee. This can be added to the loan amount, so you’ll be able to pay it off over the life of your mortgage.

2. Choice of Lenders: The First Home Loan scheme comes with restrictions on your choice of lenders; not all banks participate in the scheme.

3. Eligibility requirements: You must be a first-home buyer, i.e., not own land or a home. Secondly, you must have a household income of $150,000 or less unless you are a multi-generational household, or a family of at least six people.

Applying for First Home Help

Even if you’re familiar Kāinga Ora’s home-buying programmes, Aseem stresses the importance of expert guidance when buying your home: “At Global Finance, our mission is to ensure that every potential homebuyer fully understands their options and eligibility.”

The Global Finance team can help you through the First Home Loan application process. They can submit your application to the most suitable lender, just like a standard loan application. Their mortgage advisors maintain direct contact with banks, enabling them to stay informed about each bank’s lending criteria. This means you won’t waste time applying for mortgages from banks that aren’t in the scheme or whose criteria you don’t meet.

Additionally, they can help you with applying for loan pre-approval, so you know a bank is willing to lend to you and that the houses you are looking at are acceptable to them.

“Having pre-approval in hand puts you in a prime position to seize the right opportunity. Our experienced advisors will help you get pre-approval from a bank, so you can move ahead faster.”

Understanding Repayments and the Lending Process

Once you’ve determined your eligibility and familiarised yourself with various banks’ lending criteria, Aseem Agarwal’s team will work closely with you to ensure you understand your obligations and potential loan repayments. They’ll walk you through all the essential details, so you’re well-prepared to move forward confidently.

Moving Into Your First Home

The journey to becoming a first-time homeowner may come with challenges, but with Kāinga Ora’s First Home Loan scheme and the right support and guidance, you can get there. Global Finance’s mortgage advisors can be your guides along the way and remove the stress and hassle of putting together a loan application. Together, you can unlock the door to your first home and turn your homeownership dream into reality.

Want to know more about Kāinga Ora’s First Home Loan scheme for getting a low deposit home loan? Talk to one of the brokers at Global Finance now on 09 255 5500

The information and articles published are true to the best of the Global Finance Services Ltd knowledge. Since the information provided in this blog is of general nature and is not intended to be personalized financial advice. We encourage you to seek Financial advice which is personalized depending on your needs, goals, and circumstances before making any financial decision. No person or persons who rely directly or indirectly upon information contained in this article may hold Global Financial Services Ltd or its employees liable.