Looking for your first home?
Help to get your foot in the door
The purchase of your first home may be more in reach than you think. In 2018, the government aligned the purchase price limits of existing first home buyer schemes with the newly-launched KiwiBuild programme. As a first home buyer, or an eligible ‘second-chancer’, you could use these schemes to help you into your new home, sooner.
KiwiSaver First Home Withdrawal
If you have been a KiwiSaver member for three years or more, you may be able to withdraw your KiwiSaver funds (except $1,000) to contribute to your first home purchase. Each KiwiSaver scheme has different requirements for KiwiSaver First Home Withdrawal applications and you should contact your scheme provider directly to check your eligibility.
HomeStart Grant
Under the HomeStart Grant scheme, you could be eligible for a $3,000 to $10,000 grant for each person purchasing the property. To access the HomeStart Grant, you must have been contributing to your KiwiSaver scheme for at least three years. The amount of your HomeStart Grant is then determined by how long you have been a KiwiSaver member and the type of property you are purchasing.
HomeStart Grants are paid towards the purchase price of your home or, in certain conditions, land. As long as you live in the property for at least six months from settlement date, or when the Code Compliance Certificate is issued, you will not need to repay the HomeStart Grant.
While your eligibility for a HomeStart Grant is linked to your KiwiSaver membership, the HomeStart Grant scheme is administered separately from KiwiSaver First Home Withdrawal and requires a separate application. All applications for the HomeStart Grant are processed by Housing New Zealand (rather than your scheme provider).
Welcome Home Loan
If you can make mortgage repayments but only have a 10% deposit saved, you may be able to access a home loan under the Welcome Home Loan scheme. Your 10% deposit can include your KiwiSaver First Home Withdrawal and HomeStart Grant. Under the scheme you will be required, however, to pay additional fees (usually 1% of the loan amount) to cover lender’s mortgage insurance, as part of your repayments.
A list of the lenders offering Welcome Home Loans can be found here.
KiwiBuild Programme
The KiwiBuild Programme is aimed at developing affordable homes for purchase by first home buyers.
Under the KiwiBuild Programme, the maximum price a purchaser pays for a home is restricted. In most areas, the maximum price for a KiwiBuild home is $500,000. In Auckland and the Queenstown-Lakes region, a KiwiBuild home cannot exceed $500,000 to $650,000 depending on the size of the home.
KiwiBuild homes come with a minimum three-year ownership period, which may be recorded against your title.
Am I eligible?
The main eligibility thresholds are all the same for KiwiSaver First Home Withdrawal, HomeStart Grant and Welcome Home Loan. You must be a first home buyer or a ‘second chancer’ (which is a person in an equivalent financial position to a first home buyer).
If you have never owned property before, you only will be eligible for any of these three schemes if:
- You are purchasing in your sole name and your income is $85,000 or less before tax, or
- You are purchasing jointly with another person and your joint income is $130,000 or less before tax.
For the KiwiBuild Programme, the eligibility thresholds are slightly higher. You will be able to purchase a KiwiBuild home if:
- You are purchasing in your sole name and your income is $120,000 or less before tax, or
- You are purchasing jointly with another person and your joint income is $180,000 or less before tax.
If you have previously owned property but no longer own property, you also may be eligible if the assets you can sell to help fund your home purchase are valued at less than 20% of the price limit for an existing home in the area in which you are purchasing. For example, if you want to buy in Wellington City, your assets must be no more than $100,000 in value. Housing New Zealand offers assessment services to determine whether you are eligible.
In addition to the main eligibility thresholds, some Welcome Home Loan lenders may have their own criteria which affects whether you can access a loan through that lender.
What can I purchase?
For all of the schemes, the property you purchase must be lived in as your own home and you must reside in the property for a minimum period from settlement date or when the Code Compliance Certificate is issued.
There also are price limits on the types of property you can purchase. These vary from region to region with the price limit for existing homes being between $400,000 and $600,000. The limit for new or recently built homes is between $500,000 and $650,000. You can check the price limits for your region here.
As the maximum price of KiwiBuild homes is restricted, all KiwiBuild homes can be purchased with the assistance of funds from the KiwiSaver First Home Withdrawal, HomeStart Grant and Welcome Home Loan schemes.
Accessing the first home buyer schemes
When taking advantage of the first home buyer schemes, being organised early is critical. Each scheme has its own application process and processing time frames. Both the HomeStart Grant and Welcome Home Loan schemes offer pre-approval options which allow you to get a head start on the application process before you begin looking for your new home.
If you are considering using any of the first home buyer schemes, we also can help you with structuring your purchase agreement to ensure that you have enough time to make your applications.
For guidance and more information on buying your first home, please give us a call.
DISCLAIMER: All the information published in Property Speaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of this firm. Articles appearing in Property Speaking may be reproduced with prior approval from the editor and credit given to the source. Copyright, NZ LAW Limited, 2019. Editor: Adrienne Olsen. E-mail: adrienne@adroite.co.nz. Ph: 029 286 3650 or 04 496 5513.
