First Home Buyers
Know any would-be first home buyers?
It’s no secret that it has been a tough time for first home buyers, but there are some new (and some improved) initiatives that have recently come out of Kāinga Ora, that first home buyers should know about. They just might make getting into a first home a whole lot more achievable.
First Home Grant – a gift to help you into your first home
The First Home Grant (previously known as the Homestart Grant) is a gift of up to $10,000 per person towards the purchase of your first home. If you are purchasing an existing home you may be eligible for up to $5,000 and if you are purchasing a new home or land (and have a building contract to build) you may be eligible for up to $10,000.
The good news is that Kāinga Ora has just increased the limits on the value of the property you can purchase using the First Home Grant. The limit for Auckland is now $875,000 for both new and existing properties, and for other places such as Whangarei is now $600,000 for existing properties and $800,000 for new properties.
The annual income caps have also been increased.
First Home Partner – a co-ownership model to help you into a home
First Home Partner is a new offering from Kāinga Ora, and is likely to make a big difference to eligible first home buyers of new builds.
It involves Kāinga Ora providing up to 25% (to a maximum of $200,000) towards the purchase of your home, and then holding that same percentage of the home as a co-owner until you buy them out (expected to be over 15-25 years).
This could be a game changer for first home buyers - the example given on the website shows that if you have saved up 10% of the purchase price, and you have approval from a participating bank to lend you 75% of the value, Kāinga Ora may provide the last 15% needed to get you into that home.
Like the other schemes, you have to live in the home as your main home, and because you are co-owners, there are some additional steps around making improvements or selling, and ensuring you are moving towards your goal of buying KO out. The sale and purchase agreement will need tweaking to buy with First Home Partner, so you should get legal help before you sign the agreement.
You can use this scheme with First Home Grants, and may be able to use Kiwisaver towards your deposit too.
First Home Loan – support to buy before you have a big deposit
This new initiative from Kāinga Ora means that you may be able to get into your first home even if you only have a 5% deposit. “First Home Loans” are loans provided by a bank but underwritten by Kāinga Ora, which allows lenders to provide loans that would sit outside their usual lending requirements e.g. for a 20% deposit. The criteria require you to meet the required income caps (which at present are the same as those for a grant).
As you would expect (because the lender takes a bigger risk including of dips in property values when there is less equity) there are some differences from a standard home loan. The First Home Loan is only available through certain lending institutions (see the Kāinga Ora website for a list), and the lender can charge a 1% Lenders Mortgage Insurance (LMI), and may charge an application fee. It is always worth comparing interest rates and application fees. You still have to meet the bank’s other lending criteria to be granted a loan.
Check out eligibility and criteria here https://kaingaora.govt.nz/home-ownership/first-home-loan/check-you-are-eligible-for-first-home-loan/.
Kāinga Whenua Loan – loans enabling you to build on Māori whenua
This is a new scheme set up to allow a home to be built on Māori whenua that is owned by multiple people. Historically it has been hard to get finance to build on Māori whenua due to the different way land is held, and because of the issue of a bank exercising a power of sale. This new initiative sees whānau able to borrow to build because Kiwibank will instead take security over the house itself rather than the land. Like the First Home Grant and the First Home Loan you will need to live full-time in the house. Kiwibank will lend up to $500,000 towards the cost of the build.
Before you sign on any dotted lines, go to Kainga Ōra’s website and check out eligibility and conditions: kaingaora.govt.nz/home-ownership.
If you need advice on purchasing a property have a chat with one of our property experts Shelley, Pierre, Amie and Sandra at Henderson Reeves Lawyers 09 281 3723, or pop in to see our new offices just off the offramp at Rosebank and Patiki Roads.
