Although it can seem like all the doors are being closed to first-home buyers in today’s market, Kylie offers some wonderful workarounds that can get you into your first home.
It’s no wonder first-home buyers are feeling the doom and gloom when it comes to stepping on to the property ladder. Most banks require a 20 per cent deposit and the average New Zealand house price is now around $600k (and Auckland $1mil). So, it’s fair to say times are a little tough.
However, there are still options out there for those who don’t have a 20 per cent deposit, so don’t give up on saving just yet! Remember, LVR rules aren’t permanent, so what might seem impossible now, might very well be possible in the near-future.
In the meantime, let’s have a look at some current options:
Build your own home
This is a great option for first-home buyers as you only need a 10 per cent deposit. Plus, if you’re building as a first-home buyer and qualify for the Housing NZ HomeStart Grant, then the grant is effectively doubled to $2000 per year of membership in the scheme (up to $10,000 for five years for each member). (Note: There is a maximum income threshold and also a maximum house price of $550k in the Wellington region.) This means that in most cases a couple would be given $20,000 to put towards their build.
There are several ways a family member(s) can help you get into your first home:
1) Gift the deposit (some banks will still require you to have saved at least five per cent of genuine savings).
2) Allow their house to be used as security. In this case, no deposit is required but you will need to have both good income and credit history.
3) Purchase the property jointly with another family member.
4) A family member buys the house as an investment, with the children to live in, and pays the costs. Once equity/credit allows, the children can purchase the property.
Welcome Home Loan
The “Welcome Home Loan” is a government-backed loan aimed at getting middle income New Zealanders into their first home without needing a large deposit. Just a 10 per cent deposit is required and this can be gifted. There is a set criteria with maximum house price and income caps, as well as a one per cent fee.
There are 90-per-cent lend options with non-banks. This could be an option for those who don’t qualify for the Welcome Home Loan (whether this is due to high income or they are wishing to purchase a property that is higher than the maximum house price cap with Welcome Home loans). However, you will pay a higher interest rate with a non-bank. They will take 80 per cent of the loan and spread the repayments over 30 years, with the remaining 10 per cent on a high interest rate over a term of, say, 10 years. Once you’ve obtained 80 per cent equity in your home you do still have the option to move to a bank.
Some banks are doing “live deals” between 80 and 90 per cent for their existing clients. This is dependent on the funding available on the day, and is very limited. There is less certainty around this lending in the current environment.