Saving for a First Home Deposit

07.09.2020

There’s a popular idea out there that young Kiwi’s will never be able to buy their own home. But, while some are complaining about house prices, others are out there taking advantage of the different schemes available to help them get into their first home. From KiwiSaver to KiwiBuild, budgeting to banks, here are some options we’ve seen Kiwi’s use to make that homeownership dream a reality.

First Home PARTNER

Kainga Ora - Homes and Communities was established in October 2019, and it aims to address making home ownership a possibility for more Kiwis. There are a number of initiatives that Kainga Ora have in place for those looking to buy their first home, including First Home Grant and First Home Partner

The First Home Partner concept supports first home buyers who’s deposit and home loan approval aren’t enough to buy a home, First Home Partner (i.e. Kainga Ora) could help to bridge the gap through a shared ownership scheme. 

The maximum contribution Kainga Ora will make towards a property purchase is 25% or $200,000 (whichever is lower) and your household income, before tax, can’t be more than $130,000. You also have to meet the lending requirements of your bank, and be able to contribute a minimum 5% of the purchase price of the home. 

Another condition is that it must be a new build - either off the plan, or hasn’t been owned previously (other than by the developer or builder). It must have received a Code of Compliance within the past 12 months.


KiwiSaver 

First Home Grant comes under the KiwiSaver scheme and is applied for through Kainga Ora.  If you’ve been making regular KiwiSaver contributions for three to five years, you may be eligible for a grant up to $10,000. 

But even if you don’t qualify for the First Home Grant or First Home Partner, you should be able to withdraw some of your KiwiSaver balance to put towards your first home deposit. Like with the First Home Grant, there are some conditions that must be fulfilled first. You’ll need to be a first home buyer who has been a KiwiSaver contributor for over three years. The major caveat to this scheme is that you must live in the home you are buying—you can’t rent it out and treat it as an investment property.

Make a Budget 

The best way to reach your home deposit goals faster is by beefing up your own personal savings. Set a savings goal and stick to it. This involves making sacrifices, like cooking your own meals, living in a smaller rental or even living with family if it's an option. Sorted has this awesome budgeting tool to help get you on your way.

FIRST HOME LOANS, LEM'S & lvr'S

There is a common misconception that you need a 20% deposit to get approved for a home loan. However, some clever Kiwi’s are leaving the rental rat race years earlier and owning their own home with a 10% deposit, sometimes even less, using options like the First Home Loans scheme available through select banks (and underwritten by Kainga Ora). You only need a 5% deposit, and may mean you aren’t subject to a LEM while you repay your loan. 

A Low Equity Margin (LEM) is a percentage added to your interest rate that remains there until your loan reduces to the 80% threshold - i.e. when you have paid 20% or more (calculated on your Loan to Value Ratio or LVR). 

Although a LEM adds to the interest rate of your mortgage, you may end up saving in the long term by being on the property ladder earlier rather than paying rent in this time. 

 

KiwiBuild 

KiwiBuild works to make more new homes available to more New Zealanders. KiwiBuild homes are designed to remain within reach of new home-buyers, and as such, each KiwiBuild home must be sold under a price-cap. Since they are new builds, you may qualify for the financial support that entails through the First Home Grant detailed above. The flipside is, you’re limited to the homes available within the scheme which are only in certain locations around New Zealand.

Partner with us for your first home

Classic Builders is well-known for being a top choice for first home buyers. Our House and Land Packages are often some of the best priced on the market, along with our 25 years experience building homes for first home buyers. Get in touch with us today to understand how we can work with you to get the ball rolling so you can get into your first home sooner.

 

 

UPDATED DECEMBER 2021.

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