First Home Loan: Get into your first home sooner
Although the First Home Grant has been discontinued, the truth is this change is unlikely to significantly impact most first-time home buyers aiming to enter the property market. Instead, let's focus on another lending product that can help most first time borrowers - the First Home Loan.
The First Home Loan is a government-backed initiative designed to assist borrowers in securing a mortgage with a low deposit. With the First Home Loan, you can qualify for a home loan with as little as a 5% deposit. This scheme is especially beneficial for those eager to purchase a home but struggling to save the standard 20% deposit required by most banks. A significant advantage of this loan is that it offers 20% deposit rates regardless of the actual deposit size.
This loan is underwritten by Kāinga Ora and issued by selected banks. To be eligible, borrowers must meet several criteria, including:
- Being a New Zealand citizen, permanent resident, or resident visa holder who is ordinarily a resident in New Zealand.
- Being a first-time home buyer or a previous homeowner in a similar financial position to a first-time buyer.
- Having 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.
Additionally, borrowers must have a minimum deposit of 5%, which can be made up of savings, a KiwiSaver withdrawal, and gifts. They must also intend to live in the home and not currently own any other property or land (except for Māori land). The property purchased must be under 1 hectare, so using this loan excludes the purchase of farms or lifestyle properties.
It's important to note that borrowers must also meet the lending bank’s criteria to service the mortgage. This includes demonstrating the financial ability to repay the loan, current debt levels, and credit history. Borrowers will also likely be required to pay a 0.5% Lender’s Mortgage Insurance premium on the low-deposit loan.
The First Home Loan doesn't guarantee home ownership, but it makes it more accessible for many Kiwis. If you meet the criteria and are struggling to save the required 20% deposit, this option is worth considering as part of your home-buying journey.
We work with buyers every day who utilise the First Home Loan and KiwiSaver withdrawals, and we can guide you through the process. Get in touch with our Christchurch based mortgage advisors today by calling us at 0800 25 35 45, or click the "contact us" tab at the top of the page, and we will reach out to you as soon as possible.