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First Home Loan

The First Home Loan scheme makes getting into your own home easier with just 5% deposit needed.

With soaring house prices in many parts of New Zealand, purchasing a first home is becoming more and more out of reach for many Kiwis. Plus, let’s not forget the need for at least a 20% deposit in most cases – at least $80,000 is required to purchase a $400,000 home. With rent payments, bills and other outgoings, saving this amount can take many years unless you earn a six-figure salary.

However, it’s not all doom and gloom, as eligible New Zealanders that earn under a specific amount can purchase their first home with a low deposit thanks to the First Home Loan.

What is the First Home Loan?

The First Home Loan replaces the Welcome Home Loan, where instead of needing a 10% deposit to purchase a home, you only require 5%. Kāinga Ora Homes & Communities underwrites the scheme and gives Kiwis the chance to get into a new home much earlier, rather than needing to save for many years to reach the 20% deposit usually required.

The First Home Loan is also beneficial for lower-income households, with a maximum salary cap applicable for individuals, couples and joint buyers. While the loan is not available through all banks or finance companies, Kāinga Ora has partnered with a select group of loan providers around the country. They aim to deliver this service to eligible New Zealanders who are typically outside their lending criteria standards.

Am I eligible for a First Home Loan?

To be eligible for a First Home Loan, you need to meet the following eligibility criteria:

  • Age. Be at least 18 years of age.
  • Residency. You need to be an NZ citizen or permanent resident. Other visa holders who usually live in New Zealand are also eligible.
  • Deposit. Have a minimum deposit of 5% of the home’s value for which you wish to take out the loan.
  • Be a first home buyer. Be purchasing a home for the first time, or be a previous homeowner who wants to buy a house but is in a similar financial position to a first home buyer.
  • Income. If you are a single person, your income cannot be more than $95,000 per year. For couples and groups of people, your combined income must not be more than $150,000.
  • Price cap. The home you want to buy must have a price that is less than the regional house price cap. Price caps sit between $400,000 and $700,000 depending on what part of the country you live in and whether it is an existing or new home. Your maximum loan amount is the house price cap minus your deposit.
  • Living situation. You cannot own any other home, and you need to live in the house that you are buying rather than use it as an investment property.
  • Lender’s Mortgage Insurance. Anyone with a First Home Loan is obligated to pay a premium of 1% of the total loan amount for Lender’s Mortgage Insurance, so you need to agree to this before applying.

Even though Kāinga Ora set the eligibility criteria for First Home Loans, you also need to meet the lending criteria of participating lenders. Criteria can be different according to the lender, but they want to assess:

  • Your credit history. Do you have a good record of making repayments to credit cards or personal loans, and have you managed your accounts sufficiently in the past? You can check your credit history by requesting a free copy of your credit report.
  • Financial situation. How much do you earn, what debts do you owe and do you have any assets?
  • Repayment ability. Once you pay your weekly, fortnightly or monthly commitments, can you repay the loan without it leaving you in financial difficulty?

Which lenders offer First Home Loans

Finding a 5% deposit

Having a 5% deposit is a minimum requirement for taking out a First Home Loan. For example, if you want to buy a $400,000 house, you need $20,000, and for a home that is $600,000, you need $30,000. It may take you a few years to save for a deposit, but you can also ask family members to help you out.

Alternatively, if you have been contributing to KiwiSaver for at least three years, you may be able to get the First Home Grant which may be up to $20,000 for couples or joint purchasers who are buying a brand new home. You may also be eligible for the KiwiSaver First Home Withdrawal, which allows you to use your KiwiSaver contributions for your deposit as long as you leave $1,000 in your account.

Benefits of a First Home Loan

  • Low deposit. Traditional mortgages generally require a 10-20% deposit. Thanks to only needing a 5% deposit, you can get into your first home sooner than otherwise possible.
  • Low-income requirements. With a maximum salary cap of $95,000 for individuals and $150,000 for couples or joint purchasers, lower-income households can apply for a home loan.
  • Choice of lenders. First Home Loans are available from nine lenders, so you can find the one that suits your needs, or there may be one with which you already have a banking relationship.
  • Kiwisaver deposit help. KiwiSaver customers can take advantage of the First Home Grant or First-home Withdrawal if they have trouble saving a deposit.
  • Existing or new homes. You can choose to purchase a new home or an existing one, and some lenders allow you to build a house with your First Home Loan.

How do I apply?

Before applying, first, check that you meet the eligibility criteria set out by Kāinga Ora and that you have the 5% deposit. Next, research the participating lenders to find one that you feel comfortable with by looking at the interest rates, loan terms, fees and any other benefits that may be on offer. If you already have a financial relationship with one of the lenders, such as holding a bank account, the process may be slightly easier than applying to a new bank.

While there are different lenders to choose from, you may be limited in your choice based on where you live. For example, Nelson Building Society only has branches in the upper South Island, and SBS Bank has only 14 offices nationwide.

Once you choose a lender, you need to complete a lenders loan application. To do this, you should make an appointment to speak to a loan consultant in your nearest branch, or Westpac has mobile lending managers that can come to you if you live rurally or can’t get into a branch. The loan consultant or lending manager you deal with assesses your application and financial circumstances according to their lending criteria and lets you know their decision.

When you apply, you can opt for pre-approval or final approval. Pre-approval means that the lender confirms the amount that they are willing to lend you, so you can search for your new home with that figure in mind. If you have decided on a property, you can apply for final approval by providing the home details in your application.

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