Government Schemes for Low Deposit Home Buyers in New Zealand
For many New Zealanders, owning a home is a cherished aspiration. However, the high cost of property can make saving for a substantial deposit a significant hurdle. Fortunately, the New Zealand government offers several schemes designed to assist low deposit home buyers in achieving their homeownership dreams. This article provides an in-depth look at these government schemes, their eligibility criteria, and how they can help you get onto the property ladder.
Understanding Low Deposit Home Loans
A low deposit home loan is a mortgage that requires a smaller deposit than the conventional 20% of the property’s purchase price. These loans are particularly beneficial for first home buyers who may struggle to save a large deposit. The primary government-backed schemes facilitating low deposit home loans in New Zealand include the First Home Loan, First Home Grant, and KiwiSaver First-Home Withdrawal.
First Home Loan
The First Home Loan, administered by Kāinga Ora – Homes and Communities, is a cornerstone of the government’s support for low deposit home buyers. This scheme allows eligible buyers to secure a home loan with a deposit as low as 5%, significantly lower than the typical 20% required by most lenders.
Key Features:
- Low Deposit Requirement: Only a 5% deposit is needed.
- Underwritten by Kāinga Ora: This provides additional security to lenders, making it easier for them to offer loans to low deposit buyers.
- Participating Lenders: The loans are available through select banks and financial institutions.
Eligibility Criteria:
- Income Limits: $95,000 or less for an individual buyer, or $150,000 or less for a couple.
- New Zealand Citizenship or Residency: Applicants must be New Zealand citizens, permanent residents, or resident visa holders.
- First Home Buyer Status: You must be a first home buyer or a previous homeowner in a similar financial position to a first-time buyer.
- Primary Residence: The property must be intended as your primary place of residence.
First Home Grant
The First Home Grant, previously known as the KiwiSaver HomeStart Grant, offers financial assistance to first home buyers who have been contributing to their KiwiSaver for at least three years. The grant amount varies depending on whether you are purchasing an existing home or a new build.
Grant Amounts:
- Existing Homes: $1,000 per year of KiwiSaver contributions, up to a maximum of $5,000.
- New Builds: $2,000 per year of KiwiSaver contributions, up to a maximum of $10,000.
Eligibility Criteria:
- KiwiSaver Contributions: Regular contributions to KiwiSaver for at least three years.
- Income Limits: $95,000 or less for an individual buyer, or $150,000 or less for a couple.
- Property Price Caps: The property must be within the regional house price caps set by the government.
- Primary Residence: You must live in the house for at least six months after purchase.
KiwiSaver First-Home Withdrawal
KiwiSaver members who have been contributing to the scheme for at least three years can withdraw most of their savings to use as a deposit for their first home. This initiative is designed to help first home buyers leverage their retirement savings to enter the property market.
Key Features:
- Withdrawal Amount: You can withdraw all your KiwiSaver savings except for the initial $1,000 government contribution.
- Eligibility: Must have been a KiwiSaver member for at least three years and be a first-time home buyer or in a similar financial position to a first-time buyer.
Additional Support Programs
Kāinga Whenua Loans
The Kāinga Whenua Loan Scheme is specifically designed to help Māori individuals and families achieve homeownership on their ancestral land. This loan is secured against the house only, rather than both the house and land.
Key Features:
- Targeted Support: Focuses on Māori individuals and families.
- Flexible Security: Loan secured against the house only.
First Home Partner
The First Home Partner scheme is a shared ownership initiative where Kāinga Ora co-invests in a property with the buyer. While the buyer lives in and owns the majority of the home, Kāinga Ora retains a share, which the buyer can gradually buy out over time. However, this scheme is currently fully subscribed.
Key Features:
- Shared Ownership: Kāinga Ora co-invests in the property.
- Buy-Out Option: Buyers can gradually purchase Kāinga Ora’s share.
Progressive Home Ownership Fund
The Progressive Home Ownership Fund aims to support households that are unable to save for a deposit or meet the lending criteria for a traditional mortgage. This scheme includes rent-to-buy and shared ownership models, providing a pathway to homeownership for more New Zealanders.
Eligibility Criteria:
- Income Limits: Household income before tax must be no more than $150,000.
- First Home Buyer or Second Chancer: Must be a first home buyer or someone who has previously owned a home but is now in a similar financial position to a first-time buyer.
- Primary Residence: Must commit to living in the house as the main place of residence for at least three years.
Application Process and Tips
Applying for these schemes involves several steps, and it’s crucial to be well-prepared to ensure a smooth process:
- Check Eligibility: Review the eligibility criteria for each scheme to determine which ones you qualify for.
- Gather Documentation: Collect all necessary documents, such as proof of income, KiwiSaver contribution statements, and identification.
- Pre-Approval: Apply for pre-approval where possible. This provides certainty about your eligibility and the amount you can borrow or receive in grants.
- Consult Professionals: Engage with mortgage brokers, financial advisors, or Kāinga Ora representatives to understand your options and get expert advice.
- Timely Applications: Submit your applications well in advance of your intended purchase date to allow for processing time.
The New Zealand government offers a range of schemes to support low deposit home buyers, making homeownership more accessible. From the First Home Loan and First Home Grant to KiwiSaver withdrawals and specialized loans for Māori, these initiatives provide valuable assistance to those looking to enter the property market. By understanding the available options and preparing thoroughly, aspiring homeowners can take significant steps towards achieving their dream of owning a home. For more detailed information and to check your eligibility, visit the Kāinga Ora website or consult with a financial advisor.