Get into a property sooner with the First Home Loan
While the First Home Grant might have been axed, the truth is that this won’t have a massive impact on most first home buyers who are looking to get on to the property market.
Instead we want to focus on one First Home product that can play a crucial role in getting borrowers into the market - the First Home Loan.
The First Home Loan is a government-backed scheme, which helps borrowers with lower incomes to secure a mortgage with a low deposit. With a First Home Loan, you can qualify for a home loan with as little as 5% deposit. This loan is designed to help those who are keen to be able to buy, yet struggle to save the required 20% deposit to apply for lending with most banks. A huge benefit of this product is that you receive 20% deposit rates regardless of deposit size.
This loan is underwritten by Kāinga Ora, and the First Home Loans are issued by selected banks. There are a number of criteria that borrowers need to meet in order to be eligible. These include:
- 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 home owner 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 dependants; or
- $150,000 or less for an individual buyer with one or more dependants; or
- $150,000 or less (combined) for two or more buyers, regardless of the number of dependants
As well as meeting the above criteria, borrowers must have a minimum deposit of 5%, which includes savings, KiwiSaver withdrawal and gifts. They must also be buying the home to reside in and currently not own any other property or land (with the exception of Māori land). The property they purchase must also be under 1 hectare, so they are unable to buy a farm or lifestyle property.
Most important to factor in, is that the borrower must also meet the lending bank’s criteria in order to be able to service the mortgage. This includes your financial ability to repay the loan, your current level of debt, and your credit history. You will also be liable to pay a 0.5% Lender’s Mortgage Insurance premium on your low-deposit loan.
The First Home Loan isn't a given that you will be able to buy your first home, but it's making it much easier and puts home ownership within the reach of more Kiwis. If you believe you meet the criteria, it is definitely a great option to consider as part of your home buying journey.
We work with buyers everyday who are utilising the First Home Loan and KiwiSaver withdrawals so we can talk you through the process. Get in touch with our Queenstown mortgage advisors today by either calling us on 03 441 1307, or click our "contact us" tab at the top of the page and we will be in touch with you asap.