The process of buying your first home can be quite daunting, but it doesn’t need to be! There are a number of things you can do and options available which can help you buy your first home.
Most banks will want to see evidence of genuine savings when you apply for a mortgage. This means that you will need to have money in your account for a deposit for a minimum period of time and sometimes at least 5% needs to be from accrued savings.
So start saving today!
GET YOUR HOME LOAN PRE-APPROVED
Pre-Approval will provide you with a greater understanding of how much a lender is prepared to lend you. It will also help to speed up the process once you have found a home you like.
BUYING WITH A SMALL DEPOSIT
There are ways that you can buy your first home without having saved the 20% deposit that most banks typically require. These include
- Talking to your local Mortgage Broker who has access to a broad panel of lenders, some whom do not require a 20% deposit.
- Using cash gifts or a family guarantee
- Government grants you can apply for to boost your deposit size (not everyone is eligible)
If you have access to money that you have not saved, like an inheritance from a grandparent, or a gift from your parents – you can use it for a deposit for your first home.
Lenders will want to know where the money has come from and you will need to prove that you are able to meet the repayment obligations.
Your parents can provide a guarantee over your loan if you have a small deposit and are able to meet the repayments on your home loan. This is a popular way for parents to help as they can use their assets to guarantee the loan without paying any money up-front.
USE YOUR KIWISAVER
If you are a first home buyer and you’ve been contributing to KiwiSaver for more than three years – you may be able to use some of the money to help buy your first home.
If you’re eligible, you may be able to withdraw some, or all of your KiwiSaver member contributions, employer contributions, returns on investments received or any member tax credits. However you can’t withdraw the $1,000 government kick-start contribution.
In some limited cases, you may qualify even if you’ve owned property before.
Using your KiwiSaver is a great option for first home buyers who want to increase the size of their deposit and want to own more of their first home.
KIWISAVER HOMESTART GRANT
If you need a little bit extra to help get you across the line then you could consider a KiwiSaver HomeStart grant. If you’ve been contributing to KiwiSaver for three years and fit within KiwSaver’s criteria you could be eligible for up to $20,000 of additional grants.
To be eligible you must:
- Have been contributing to KiwiSver for at least three years
- Be 18 years of age or over
- Be purchasing or building your first home
- Have a household income (before tax) f less than $80,000 per year (for one person), or less than $120,000 per year (for two or more people)
- Have a deposite that is 10% or more of the purchased price, including the addition of the grant
- Plan to live in the house for at least 6 months following settlement or completion of the property.
A WELCOME HOME LOAN
While saving a big enough deposit is the obvious way to get on the property ladder – there are additional initiatives designed to help. Welcome Home Loans are issued by selected banks, underwritten by Housing New Zealand, and allow the bank to lend on a lower deposit without any restrictions. For first home buyers it can mean getting on the property ladder sooner.
When buying your first home, every little bit helps – so make sure that you understand what options are available to you.
Talking to your local Mike Pero Mortgage Adviser can help you make sense of all the options, paperwork and processes. And, they have access to a broad range of lenders and loans, so they can help you find a loan that fits your requirements.