How much can I borrow?
Here’s the thing. Banks want to lend to you. That’s how they make their money. This means they’ll often let you borrow more money than you can actually afford. So unless you like living off baked beans and two-minute noodles, you’ll need to work out what you can borrow in real terms, whether you’ll have to amend your spending and by how much.
To give yourself an idea of how much you can afford to borrow, enter a few basic details into this handy mortgage calculator. It’ll only take you about 30 seconds (yep, we’ve timed it).
Once you’ve got a 20% deposit, you’ll find banks will be prepared to lend you just about anything.
While a 20% deposit is ideal, we can work with as little as 15% savings in the bank. Borrowing over 80% can get trickier, and more expensive.
If you don’t have a wad of cash in the bank, there are still options. The easiest and cheapest way to buy is going to the “bank of mum and dad”. This means 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 can be secured over a term deposit. You can find out more about the ins and outs of this here.
If you're a first home buyer you can withdraw your KiwiSaver contributions to use as a deposit towards your new home as long as you’ve been with KiwiSaver for at least 3 years.
There are some requirements to be able to withdraw your KiwiSaver. In order to withdraw some or all of it you must:
- have been a KiwiSaver scheme member for at least three years;
- be planning to live in the house for at least six months, and
- be buying your first home.
To get the additional subsidy, you must also:
- be planning to live in the house for at least six months,
- have contributed at least 3% of your income to a KiwiSaver scheme for at least three years,
- have a single income under $85,000 or a combined yearly income of $130,000 or less (before tax) two buyers,
- be buying a house under $600,000 in Auckland, $500,000 in other major metropolitan areas, and $400,000 across the rest of New Zealand.
Getting your money out:
If you have a conditional sale and purchase agreement you can choose to make your withdrawal at the point of deposit or when you settle.
If KiwiSaver isn’t an option for you, then you’ll want to make other arrangements for this amount such as a deposit bond, which we can also help you with.
In addition, if you earn less than $130,000 and are buying for less than $600,000 (or building new under $650,000) in Auckland, $550,000 in other major metropolitan areas, and $450,000 across the rest of New Zealand, you may be eligible for a HomeStart Grant of up to $5,000 per borrower. Check out the HomeStart Grant eligibility site.
The HomeStart Grant is $1,000 for each year you’ve been with KiwiSaver, up to a maximum of $5,000 for five years. If you’re a couple buying a house together and you both qualify for a grant, you could receive a combined grant of up to $10,000.
It gets better if you’re buying off plan or building new. You could double your HomeStart Grant up to $20,000 per couple.
First Home Buyer's Guide
Be sure to grab your copy of our First Home Buyer's Guide - it's jam packed with everything you need to know.
Welcome Home Loans are issued by selected banks and other lenders and are underwritten by Housing New Zealand. This allows the lender to provide loans that would otherwise sit outside their normal lending standards.
To be eligible for a Welcome Home Loan you need to meet certain minimum criteria:
- Income cap: You can have a maximum yearly income of up to $85,000 (before tax) for 1 person. Or a combined maximum yearly income of $130,000 (before tax) for 2 or more people.
- Minimum deposit: You will need a minimum 10% deposit
- House price cap: The price of the house you are buying with a Welcome Home Loan must be less than the regional house price cap.
- NZ Citizen: You need to be a NZ Citizen or NZ Permanent Resident.
For more information and full eligibility criteria check out the Welcome Home Loan site.
The good news is that mortgage products have become fairly flexible, as long as you plan around them properly. So if you’ve got plans to start a family and are reliant on two incomes, or dreaming of your OE in Spain for a year, we can help you figure out how to structure your mortgage around those plans.
Starting a family
We deal with lots of young professionals who are planning on starting a family, but whose large mortgage also means they rely on two incomes.
The key to starting a family is planning your finances in advance.
- You need to be able to cope on one income for up to 12 months. What will your monthly shortfall be?
- Take into account your higher living costs once your partner goes back to work – this will usually be around $1,500 extra a month.
- Put all of your savings into the mortgage using revolving credit. Aim to repay enough so that you can cover at least 12 months of income shortfall. With revolving credit you can access the funds you pay off at any time.
Provided you own more than 20% of your home, you can also put your mortgage onto interest-only for a while. This will reduce repayments to cover any shortfall.
You’ll get 12 weeks paid parental leave, and if your household is earning less than $80,000 while one of you is off work, you could be entitled to Working for Families benefits too.
With the right planning, you’ll be able to stress less about your finances so you spend your energy enjoying your new family.
We can help
- develop a personal mortgage plan specifically for you. This will help you plan your finances before starting a family. We can then review your plan every year to make sure you stay on track.
- arrange life and health insurances so that you’re well covered, but not paying too much.
Used properly, an equity release mortgage (ERM) can be fantastic for people who own property and are on a limited income.
With an ERM, you can borrow against the value of your property with no need to make repayments. The interest is added to the mortgage balance and the mortgage is repaid when you vacate the property and the home is sold.
A lifetime guarantee means you can stay in your home for the rest of your life, and a no negative equity guarantee stops the mortgage ever being more than the value of your home. In simple terms, you still own your home and no one can kick you out.
We can discuss whether or not an equity release mortgage is right for you as part of our retirement plan service.
Features and benefits
- The amount you can borrow depends on your age (at 67 you can borrow up to 22% of the property value, at 80 35%, and at 90+ 45%).
- The mortgage has a no-negative equity guarantee so that the loan balance can never exceed the value of the property.
- Establishment fees range from $695 through to $895. There is an additional charge for a property valuation (usually about $500) that can be added to the loan. It is also compulsory to get independent legal advice, which will set you back at least $500. So total up front costs are close to $2,000.
- Fixed and floating rates are available, although we don’t recommend a fixed rate for life because of the potential cost to you if you repay the loan early.
Using equity as part of your retirement plan
Planning for your retirement can be tricky – it’s very difficult knowing how much you have to spend every year so that your savings last your whole life. Equity release can act as the insurance buffer for your retirement savings.
Knowing that you can access equity from your home (and that property prices appreciate) you can budget to spend your other investments in the short term. You’ll have more cash to have more fun, and then, if you live longer than you expect (always good news), you can fall back on the equity in your home.
Something else to consider if you want to grow your savings but still need regular access to your money could be Squirrel Money. Squirrel Money Investors get returns of around 8% p.a. which is paid out monthly instead of at the end of the term. There are 2, 3 and 5 year term options and we operate a reserve fund to help protect your hard earned money against Borrower default (provided the reserve fund has sufficient funds available).
With severe restrictions on borrowing with less than a 20% deposit, one way around the rul...Read More ›