First Home Buyers are taking advantage by purchasing their first home with a deposit of 5%. Cost of living, high interest rate and inflationary pressure is not holding the buyers back from seizing the opportunity to unlock their first home dreams.
Reserve Bank of New Zealand has hinted that the peak of OCR has been achieved but doesn’t conclude any further increases.
The next CPI update on 19th July 2023, will show the strength of the monetary policy on countering inflation.
Some economists are predicting another 25 basis point increase later this year, which is a “wait and watch” situation.
Can you maximise your opportunity to be home owner?
Despite the challenges, there are government incentives for the first home buyers, with some banks having partnership with Kāinga Ora for the First Home Loan scheme.
With the latest data showing skyrocketing rental values and shortage on the properties of your choice available.
Moving to your own house, you have luxury to more control, you can make the enhancement of your own choice without restriction imposed by landlords.
With Kāinga Ora First Home Loan, you and your family can move into your own property with a house deposit as low as 5% of the purchase price.
Let’s say, purchase price for your home is $700,000, your share of contribution of $35,000.
What are the benefits?
- Entering the housing market with finance pre-approval, so that you can enter the next open home with confidence.
- Stronger position to negotiate on purchase compared to someone with no pre-approval.
- With pre-approval, you don’t have to place yourself in situation of missing out on the house.
Am I eligible?
If you meet the following criteria, then you are one step closer:
- Be a New Zealand citizen, permanent resident, or a resident visa holder who is “ordinarily resident in New Zealand”.
- Be a first home buyer, or a previous homeowner in a similar financial position to a first home buyer..
- Have a before tax income from the last 12 months of:
- $95,000 or less for an individual buyer without dependents; or
- $150,000 or less for an individual buyer with one or more dependents; or
- $150,000 or less (combined) for two or more buyers, regardless of the number of dependents
Few more criteria:
- Minimum 5% deposit of the purchase price.
- Purchasing property to live in as your primary place of residence.
- Not an owner of any other property or land, this does not include ownership of Māori land.
- Property is less than 1 hectare.
- Pay a 0.5% Lender’s Mortgage Insurance premium and loan application fee (if applied by the lender)
Does bank lending criteria apply?
Banks with working partnership with the Kainga Ora First Home Loan Scheme are still assessing loan application as per their credit policy, and terms and conditions.
Some of the best practices:
- Keep a close eye on your bank account. If you have future dated bill payment, direct debit, automatic payment and direct debit, make sure your payment frequency is aligned to match your circumstances. Most of the Banks have digital banking channels, to make your life easier when it comes to managing your bank account.
- Good credit history, proving your bank that you are able to meet your debt commitments.
- Exposure to credit should be considered, overly exposing yourself to high level of debt can reduce your budget surplus.
Don’t forget, Banks will assess your serviceability, they want to ensure your current financial position has the ability to concur the proposed housing loan while maintaining a healthy lifestyle.
Do you need help with deposit?
Bank deposit, grants, first-home withdrawals, and gifts is acceptable for 5% deposit.
If you have made regular contribution towards your KiwiSaver for atleast 3 years, can make you eligible for First Home Grant:
- With the purchase of existing developed home, you can receive $1,000 for each of 3 years you have contributed towards the KiwiSaver. A cap of $5,000 applies for 5 or more years of contribution.
- With the purchase of newly developed home, you can receive $2,000 for each of 3 years you have contributed towards the KiwiSaver. A cap of $10,000 applies for 5 or more years of contribution.
Members of the KiwiSaver Scheme, who has met the eligibility criteria for first home withdrawal may be able to use their KiwiSaver savings (including tax credits) and retain $1,000 in the KiwiSaver account.
Please note; it is paramount you contact your KiwiSaver provider to uncover all the questions regards to “using KiwiSaver” to purchase your first home.
What about the House Price Cap?
House price cap for First Home Loan no longer applies.
House price cap for existing and new properties does apply, if you are seeking to access First Home Grant.
Region | Existing properties ($) | New Built ($) |
Auckland | 875,000 | 875,000 |
Hamilton Urban Area (Hamilton City, Waipā District, Waikato District) | 650,000 | 775,000 |
Tauranga Urban Area (Tauranga, Western Bay of Plenty District) | 800,000 | 875,000 |
Wellington Urban Area (Kāpiti Coast District, Upper Hutt City, Porirua City, Lower Hutt City, Wellington City) | 750,000 | 925,000 |
Christchurch Urban Area (Waimakariri District, Christchurch City, Selwyn District) | 575,000 | 775,000 |
Queenstown-Lakes District | 875,000 | 925,000 |
Southland District | 500,000 | 650,000 |
House price caps for all the region across New Zealand can be accessible on Kāinga Ora.
The latest report on new residential lending by borrower type by Reserve Bank of New Zealand, shows first home buyers have been active to find their own house.
First Home buyers are taking advantage of the drop in property value and easing lending restriction. A jump in total lending for first home buyers in the month of May 23 to $1,422m when compared to same month last year at $1,314m. FHBs seem to be prioritizing their homeownership plans soon than later despite the challenging interest rates and cost of living situation.
Owning a home is an asset, not only provides you a shelter and comfort living situation, but it does make knowledgeable on the buying process so that you can either help your friend or family or even makes you more confident on the next phase of home buying journey.
Let’s connect to work out how you can take advantage of this great opportunity.
Disclaimer: The article should not replace or used as a substitute for personalised financial advice. It is recommended that you seek independent financial advice based upon your needs, goals, and situation. SK Financial Group and their employees cannot be held accountable to the information in the article. We are not responsible or liable for accuracy of data, any information, omissions or errors. Please check our disclosure statement on our website for full information, alternatively you can contact us for full disclosure, terms, and conditions.