Basically, banks won't lend the whole amount for a house - you need to be able to put down a deposit, and the more the better. Ideally 20% of the house value, because banks don't generally like to lend more than 80%, so you've got to cough up a bit of cash. This will also work better for you because you'll be able to access the more competitive interest rates.
Don't despair though, if you don't have an odd $150k in your back pocket (who does?) there are a few ways to reach the amount you need. Because here's the thing: the banks want you to demonstrate that you've saved 5% on your own, and that includes your KiwiSaver. As long as 5% is saved, they don't really care where the rest comes from.
On another positive note, in January 2018 the RBNZ (Reserve Bank of New Zealand) loosened up their rules about lending to people with less than 20%. You can find out more about that here.
If you're a first home buyer you can withdraw KiwiSaver contributions made by you and your employer to use as a deposit towards your new home if you meet these conditions:
In addition to KiwiSaver, if you earn less than $130,000 and are buying for less than $600,000 (or building new under $650,000) in Auckland, you may be eligible for a HomeStart Grant of up to $5,000 per borrower.
You can find out more about these options in our First Home Buyers Guide (aka your new bible).
The easiest and cheapest way to buy is using your parents to guarantee that part of your 20% deposit you don’t have.
Their guaranteed portion will be secured over their property or it can be secured over a term deposit, so you're not asking them to fork out cash, it's more like putting a 'hold' on their existing equity until you've paid that portion back.
In the event they use a term deposit as security, the term deposit stays in your parent’s name and they continue to earn interest on it. Guaranteed home loans are treated the same as loans under 80% so you get great interest rates, there are no fees, and you’ll even get a cash contribution from the bank. On an average loan size of $400,000 you will save around $10,000 using this option. Using a guarantor makes strong financial sense, even if you can go it alone.
Your parents need to be in a stable financial situation and still working (so ideally not retired on a sailboat, spending your inheritance).
If they want to know more about what they're signing up to and any potential risks, we're happy to chat! Just call us on 0800 21 22 30.
Every now and then the government recognises how blimmin' hard it is for first home buyers to get into the market, and introduces new ways to help out. We update our blog with any changes we think you should be taking advantage of, like these ones:
For those of you who have read my recent article Top 5 first home buyer tips, you may remember me talking about the opportunities that have presented themselves over the last year or so to potential first home buyers. Where there’s a will there’s a way, as they say, and that certainly seems to be the case with the current New Zealand property market.
It’s tough being a first home buyer. But with a bit of foresight and forward planning, we’ve got a few tips to help you make it work.
Chances are, when you signed up for KiwiSaver some 10 years ago (or less) if you were young, then you put it in an aggressive fund and have hopefully reaped the rewards of that.
We send a newsletter out every couple of months with the latest articles, which often includes news or tips for first home buyers. Sign up if you're keen to keep up to speed.
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