Buying a first home is one of the goals that KiwiSaver was made for. Part of the purpose of KiwiSaver is to help us grow assets, and one way is by using it for a first-home withdrawal when you’ve built up some money in it. The second way is through a KiwiSaver First Home Grant, which could give you as much as $10,000 more for a home.
A ‘First Home Loan’
This is a form of Government help targeted at those who are able to afford mortgage repayments but struggle to save the typical 20% deposit. A ‘First Home Loan’ aims to make it easier to get into your first home by stipulating you only need a 5% deposit to get into it, provided you qualify.
First Home Loans are issued by selected banks and other lenders, and underwritten by the Crown agency Kāinga Ora. This allows the lender to provide loans that would otherwise sit outside their lending standards. The loan is issued through KiwiSaver, which you must be a member of, and Kāinga Ora effectively guarantees 15% of it.
These loans are available to qualifying first home buyers and also to people who are effectively in the position of a first home buyer, such as someone who’s owned a house in the past but is now struggling to buy again.
Eligibility for a First Home Loan
If you are a member of KiwiSaver and have been contributing regularly for at least three years, you may be eligible for a First Home Loan and a KiwiSaver first-home withdrawal.
The First Home Loan provides eligible first-home buyers with a grant of up to $5,000 for individuals and up to $10,000 for two or more eligible buyers to put towards the purchase of an existing/older home. In addition, the First Home Loan also provides eligible first-home buyers with a grant of up to $10,000 for individuals and up to$ 20,000 for two or more eligible buyers to help with the costs of purchasing a brand new home.
Eligible members can withdraw their KiwiSaver contributions (including Government contributions) but must leave at least $1,000 in their KiwiSaver account.
Who is eligible for a First Home Loan?
There are specific criteria determining who is eligible for First Home Loans. You must have a 5% deposit. In addition, there is an an income cap and relevant house price cap, plus you’ll need to meet the specific lending criteria of the participating lender you choose.
To be eligible for a First Home Loan your combined household income for the last 12 months must have been $95,000 or less (before tax) if you are the sole borrower. If you are teaming up with one or more borrowers to buy a house, then you can have a combined household income up to $150,000 or less (before tax) in the last 12 months.
Each region has house price caps and the maximum loan for that region is the house price cap less your 5% deposit. The deposit can be gifted from a relative. Three or more borrowers can also team up to purchase a home, making it easier for extended families to own a home.
There are seven regional house price caps which Kainga Ora details, ranging from $400,000 to $650,000 to help buy an existing/older property. There is also a range of between $500,000 and $700,000 to help buy new property.
New homes are defined as homes which have received their building code compliance certificates less than 12 months before the participating lender submits a First Home Loan. Auckland has the highest price cap, set at $625,000 for existing/older properties and $700,000 for new properties.
The other criteria for a First Home Grant are that you are buying your first home, are buying the house to live in, don’t own another house, and can meet the lender’s credit criteria.
Using gifted funds towards your deposit
With the ever-increasing cost of houses in New Zealand it has become increasingly popular for first home buyers to use assistance from family members to get enough money together for a deposit. Gifted funds are where a parent or other family member gifts you money which you put towards your house deposit.
You must provide evidence such as a statutory declaration that this money is actually a gift, rather than a loan which needs to be repaid and therefore is effectively another debt.
Using a family equity loan towards your deposit
An alternative to family gifting you money towards your deposit is for them to agree to using the equity in their own property as security for the deposit portion of your loan.
This will involve two loans, a loan in your name, as the first home buyer, for up to 80% of the value of your property and a second shared loan co-borrowed with your family member for up to 20% of the value of your property. As the first home buyer you are required to re-pay both these loans but if you are unable to service it at any stage your family member will be called upon to service the shared portion.