Jun 7, 2022 3:06:23 PM

Getting Onto The Property Ladder a Little Easier

Topics: Mortgage Advisers, First Home Buyer, Buying a home in NZ 0

For some first home buyers, getting onto the property ladder could be a little easier, after Government announced in Budget 2022 changes to the First Home Loan and First Home Grant. Along with updates to house price caps, other changes included support for solo first home buyers as well as a 6-monthly review of house price and income caps, ensuring these remain up to date and reflective of market changes. Here’s an overview of the changes along with helpful information for eligible first home buyers.


First Home Grant

The First Home Grant was designed to help first home buyers get onto the property ladder by covering part of the deposit required to buy a first home.  

Eligible home buyers accessing the First Home Grant receive $1,000 for each of the three or more years they have paid into KiwiSaver when buying an existing home, up to a maximum $5,000, or $2,000 for each of the three or more years paid into the scheme when buying a new home or land to build on, up to a maximum of $10,000 to top up your deposit.  

Restrictive house price caps combined with a surge in house prices in recent years has meant many first home buyers have missed out, unable to access the scheme. But that’s all changed: As of 19 May 2022, house price caps under the First Home Grant have been increased to be more reflective of the estimated values of new and existing properties in each region.

Experts in the finance industry have welcomed the changes to house price caps, saying these reflect far more closely the current state of New Zealand’s property market. At the same time, property data provider, CoreLogic reports a slow-down and a drop in property prices in some areas. The combination of higher price caps and a slow-down in property price rises could mean opportunities for first home buyers in both new developments and existing properties.

However, given that income caps remain in place for those accessing the First Home Grant, and in light of the responsible lending rules that require banks to be stringent about ensuring people can afford their loans, borrowers will need to manage debt and other expenses very carefully in order to meet lenders’ affordability criteria and get loan approval. 

As a reminder, under the First Home Grant eligible borrowers must have earned:

  • $95,000 or less before tax for an individual buyer
  • $150,000 or less before tax for an individual buyer with one or more dependents
  • $150,000 or less before tax for 2 or more buyers, regardless of the number of dependents. 

First Home Loan

For most first home buyers, saving a deposit is the biggest stumbling block to buying a first home, with many lenders requiring a minimum of 20 per cent deposit. Under the First Home Loan, borrowers will only need a 5 per cent deposit when applying for a home loan with selected lending institutions underwritten by Kāinga Ora.

Furthermore, the removal of house price caps for the First Home Loan means borrowers are not restricted to buying a property that meets these requirements. But, with income caps in place as per the First Home Grant (see above), home buyers will still need to earn enough to support a mortgage and meet lenders’ lending requirements.

The most important change to income caps is the introduction of a solo first home buyer with dependent(s) category, opening up options for single parents with enough income to support mortgage repayments.

As always, it pays to get financial advice when buying a home or investment property, especially if you’re new to the property market and struggling to keep up with recent changes to legislation.

If you’d like financial advice with a view to buying a first home, new home, or investment property – or you’re considering refinancing an existing mortgage – get in touch with a Mortgage Express branded adviser today.