First Home Loan Options for 2024
Buying your first home is a significant milestone and a major financial commitment. In New Zealand, there are various loan options and support schemes available to help first-time buyers navigate the property market. This article explores the key first home loan options for 2024, providing insights into eligibility criteria, benefits, and considerations to help you make an informed decision.
KiwiBuild
KiwiBuild is a government initiative aimed at increasing the supply of affordable homes for first-time buyers. The programme focuses on building new homes in areas with high demand and offers properties at below-market prices.
Key Features:
- Eligibility: To qualify, you must be a first-time buyer or a “second-chancer” (someone who has previously owned a home but no longer does and meets certain financial criteria).
- Income Cap: For a single buyer, the income cap is $120,000 per year, and for a couple, it is $180,000 per year.
- Deposit Requirement: A minimum deposit of 5% of the purchase price is required.
Considerations:
- Limited Availability: KiwiBuild homes are limited in number and location, so availability may be restricted.
- Ballot System: Properties are often allocated through a ballot system, meaning you may not secure a home even if you meet all the criteria.
First Home Loan
The First Home Loan, supported by Kāinga Ora (Housing New Zealand), is designed to help low to moderate-income earners buy their first home with a low deposit.
Key Features:
- Low Deposit: Requires only a 5% deposit, compared to the typical 20% required by most lenders.
- Income Cap: The income cap is $95,000 for a single buyer and $150,000 for a couple or two or more buyers.
- House Price Cap: The property price must be within the regional house price caps set by Kāinga Ora.
Considerations:
- Lender Participation: Not all banks and lenders participate in the First Home Loan scheme, so your choice of lender may be limited.
- Mortgage Insurance: You may need to pay a mortgage insurance premium, which can add to the overall cost of the loan.
KiwiSaver First Home Withdrawal
KiwiSaver members can withdraw their savings to put towards the purchase of their first home. This option is particularly beneficial for those who have been contributing to KiwiSaver for several years.
Key Features:
- Eligibility: You must have been a KiwiSaver member for at least three years.
- Amount: You can withdraw your contributions, your employer’s contributions, and government contributions (excluding the $1,000 kick-start if you received it).
- First Home Grant: If you are eligible, you can also apply for the First Home Grant, which provides up to $5,000 for an existing home or up to $10,000 for a new build.
Considerations:
- Impact on Retirement Savings: Withdrawing your KiwiSaver funds will reduce the amount available for your retirement, so consider this carefully.
- Application Process: The process can take several weeks, so plan ahead to ensure the funds are available when you need them.
Welcome Home Loan
Similar to the First Home Loan, the Welcome Home Loan is another initiative by Kāinga Ora designed to help first-time buyers with a low deposit.
Key Features:
- Low Deposit: Requires only a 10% deposit.
- Income Cap: The income cap is $95,000 for a single buyer and $150,000 for a couple or two or more buyers.
- House Price Cap: The property price must be within the regional house price caps set by Kāinga Ora.
Considerations:
- Limited Lender Participation: Not all lenders offer the Welcome Home Loan, so your options may be limited.
- Mortgage Insurance: You may need to pay a mortgage insurance premium, which can increase the overall cost of the loan.
Bank Loans
Most major banks in New Zealand offer a range of mortgage products tailored to first-time buyers. These loans typically require a higher deposit than the government-supported schemes but may offer more flexibility.
Key Features:
- Deposit Requirements: Typically, banks require a 20% deposit, but some may offer loans with a lower deposit under certain conditions.
- Interest Rates: Banks often offer competitive interest rates, with options for fixed, floating, or split-rate mortgages.
- Special Offers: Banks may provide special offers for first-time buyers, such as cash incentives, lower interest rates for the first year, or reduced fees.
Considerations:
- Credit Score: Your credit score and financial history will significantly impact your ability to secure a loan and the terms offered.
- Loan Features: Consider the features of the loan, such as the ability to make extra repayments, redraw facilities, and offset accounts.
Non-Bank Lenders
Non-bank lenders can be an alternative for those who may not meet the strict criteria of traditional banks. These lenders may offer more flexible terms but often at higher interest rates.
Key Features:
- Flexible Criteria: Non-bank lenders may be more willing to work with borrowers who have lower deposits or less-than-perfect credit histories.
- Quick Approval: Non-bank lenders often have faster approval processes compared to traditional banks.
Considerations:
- Higher Interest Rates: Non-bank lenders typically charge higher interest rates, which can increase the overall cost of the loan.
- Reputation and Regulation: Ensure the lender is reputable and regulated by the Financial Markets Authority (FMA) to avoid potential issues.
Navigating the various first home loan options in New Zealand can be complex, but understanding the available schemes and their requirements can help you make an informed decision. Whether you opt for a government-supported loan, utilise your KiwiSaver funds, or secure a mortgage through a traditional or non-bank lender, each option has its benefits and considerations.
It’s essential to thoroughly research and compare the options, considering factors such as deposit requirements, interest rates, eligibility criteria, and additional costs. Consulting with a financial advisor or mortgage broker can also provide valuable insights and help you choose the best loan for your circumstances.
By exploring these first home loan options and understanding their implications, you can take a significant step towards achieving your dream of homeownership in 2024.