First-time homebuyer grant
In New Zealand, there are two ways first-time homebuyers can get help buying a home. The first is a government grant that is linked to KiwiSaver. The second is the Welcome Home Loan, which helps people with modest incomes, who fall outside of standard lending criteria, get a home loan with little or no deposit. Housing New Zealand provides lenders with mortgage insurance to participating banks, building societies and other credit institutions.
The KiwiSaver Homebuyer Grant
First-time homebuyers over the age of 18 who have had a KiwiSaver account for three years are eligible for the Home Buyers Grant. For one or two buyers, the maximum income cap is a combined annual income of $100,000 or less (before taxes) or $140,000 or less (before taxes) for three or more buyers. The grant value is currently $3,000.00 but will increase to $4,000.00 in 2011, $5,000.00 in 2012, and $10,000 in subsequent years. To be eligible, applicants must have contributed at least 2% of their income to a KiwiSaver plan in the past three years. They must live in the house for at least six months and not own any other property. There are also certain regional maximum purchase price caps. Limits are $400,000 for Auckland City, North Shore City, Rodney District, Wellington City and Queenstown Lakes District and $300,000 for all other areas.
Due to eligibility conditions, only 300 KiwiSaver members are expected to take advantage of the offer. In addition, many people signed up for KiwiSaver after July 2007 and will only be eligible for the grant after their personal KiwiSaver turns three years old. The expectation is that 1,000 per year will be applied starting in 2011. People who invested in KiwiSaver early on will be able to spend their own savings (which would otherwise be locked up until retirement) as well as take the $3,000 grant for a first living place. . Applicants must apply through their KiwiSaver provider or Housing New Zealand for pre-approval via their website. Both the first home deposit allowance and the first home withdrawal can be used to purchase land to build a home or purchase an apartment under construction.
The Welcome Home Loan
Welcome Home Loans are for people who have no deposit or only a small deposit. It is a government-supported initiative to make homeownership finance more accessible to low-income New Zealanders. It is to help people who can afford a home loan but are having trouble saving for a deposit. The following income and purchase price caps apply:
Maximum Income: For 1 or 2 borrowers, a maximum annual household income of $85,000 (before taxes) and for 3 or more borrowers, a maximum annual household income of $120,000 (before taxes).
Maximum Purchase Price: Up to $200,000 can be borrowed with no deposit required. The maximum purchase price is either $280,000 or $350,000 depending on where you are shopping.
The Welcome Home loan is for owner-occupied properties only, not rental properties, and borrowers must not own any other property. Borrowers may be required to pay fees, such as an application fee and a mortgage insurance premium fee to lenders, but in most cases these can be built into the mortgage loan. Applicants must be New Zealand citizens or have permanent residence on an indefinitely returning resident visa to be eligible.
How do I apply for a Welcome Home loan?
To apply for a Welcome Home Loan, you must choose a participating lender and complete a loan application form. Each participating lender will apply its own credit criteria when evaluating your lending capacity. Each participating lender will have its own interest rates and fees. One such fee is to reimburse the lender for the lenders mortgage insurance premium that Housing New Zealand charges to insure each home welcome loan. The amount of this fee is 1% of the loan amount, which can be added to the loan. Contact the participating lender to discuss your personal situation.