Sep 27, 2019 10:08:00 AM

5% deposits for first-home buyers

Topics: First Home, NZ Finance, First Home Buyer, NZ Mortgage Adviser, Low Deposit, Home Loan Advice 6

Recent changes to KiwiBuild could help more first home buyers into the property market. Early in September 2019, Government announced a reset of the affordable housing policy including a drop in the deposit requirements for Welcome Home Loans, progressive home ownership schemes, and the removal of the earnings limit so multiple buyers could be eligible for combined HomeStart Grants.

First home buyer

Changes to KiwiBuild and Welcome Home Loans
After seven months of developing the policy, Housing Minister Megan Woods released the much-anticipated KiwiBuild reset earlier in September 2019. Here are the changes that Government announced would be made to KiwiBuild:

• Government’s target to build 100,000 homes has been scrapped after falling significantly short.

• As part of the KiwiBuild reset, studio and one bedroom KiwiBuild homes can be on-sold after one year instead of three as previously stipulated.

• Up to 10 per cent of KiwiBuild homes can be over the price cap for four bedrooms or larger.

• The amount that Government will underwrite has been reduced.

With the reset to KiwiBuild comes a number of changes – and potential opportunities – for first home buyers.

• $400 million has been set aside from KiwiBuild to go toward a progressive home ownership scheme.

• Progressive home ownership schemes include a shared equity scheme whereby a third party would own part of the property while a rent-to-buy scheme would see a portion of rent set aside to build up equity or a deposit for the home either outright or through the shared equity scheme. Between 2,500 and 4,000 households are expected to come under a progressive home ownership scheme.

• The deposit required for a Government-backed mortgage has been reduced to five per cent from 10 per cent in the rebranded Welcome Home Loan scheme now called the First Home Loan scheme.

• Additionally, the cap on house prices for groups of buyers of three or more receiving the grant has also been removed, so that groups of buyers can pool their $10,000 deposits for a home of any price.

There have been no changes to existing house price caps or income restrictions under the rebranded First Home Loan scheme. Houses can be up to $650,000 in Auckland and Queenstown, $550,000 in the other main centres and $500,000 in the rest of New Zealand. The income cap is fixed at $85,000 for a single borrower or $130,000 for a couple.

Borrowers will still need to meet lending criteria, the most important of which is the ability to service the loan and may also face higher borrowing costs and lender’s mortgage fees.

If you are considering accessing the First Home Loan scheme, get in touch with a Mortgage Express adviser to discuss your options. Our team of experienced advisers can guide you through the mortgage maze and ensure you fully understand your finance options.

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While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken by Mortgage Express Limited for any errors or omissions. This publication does not constitute personalised financial advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication.

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