Empowering First Home Buyers in New Zealand: Deposits, KiwiSaver, and Grants Unveiled

Embarking on the journey to homeownership is an exciting chapter in life, and in New Zealand, securing your deposit is the first crucial step. Traditionally, having a deposit that is 20% of the property’s purchase price has been the gold standard, however, there are options that will allow you to have a deposit as low as 10%, or even 5%.

Whether you’re aiming for that 20% mark or considering the lower deposit options, understanding the dynamics of each option is essential. Beyond just a financial benchmark, your deposit plays a role in influencing interest rates and overall home affordability.

In this article, we’ll explore the various avenues you have to gather your deposit, from diligent savings to utilising financial tools like KiwiSaver and First Home Grants. Your journey to homeownership begins here, and it’s within reach.

House deposits

Securing your deposit is a crucial stage in the journey of purchasing your first home. Here in New Zealand, the conventional wisdom has been to aim for a deposit that’s 20% of the property’s purchase price. However, it’s important to know that options exist for those with deposits as low as 10% or even 5%. While having a 20% deposit is ideal, signifying financial stability and leading to lower interest rates, dipping below this threshold may incur additional costs, such as higher interest rates due to perceived risk by some banks.

There are a few ways you can pull your deposit together, including:

• Savings: The traditional way involves consistently putting an amount away each month and requires a disciplined approach to reach your goal.
• KiwiSaver: Harness the power of your KiwiSaver account! For many, it’s a substantial source of funds to contribute towards your deposit.
• First Home Grants: If you’ve been contributing to your KiwiSaver for at least 3 years, you may be eligible for a First Home Grant.
• Family Support: Sometimes, the generosity of able family members can be a game-changer. A gift can provide the financial push you need to secure your deposit.

KiwiSaver to boost your deposit

KiwiSaver isn’t just a retirement savings scheme; it’s a vital tool for first-home buyers. If you’ve been a KiwiSaver member for a minimum of three years, you may have the opportunity to withdraw your savings, including any government contributions earned, to use towards your deposit.

Here are the key details you need to know:

• Eligibility: You must have been in KiwiSaver for a minimum of 3 years and it’s important to note that you must keep a minimum of $1,000 in your KiwiSaver account.
• Intention to live in the property: The purpose of using your KiwiSaver funds is to contribute towards the purchase of your primary residence, therefore it cannot be used for investment properties, or to purchase a home you don’t plan to live in.
• Complying funds: While most KiwiSaver schemes allow you to withdraw for a first home purchase, not all do. It’s crucial to discuss this with your fund providers to determine if you are eligible.

Applying for a KiwiSaver withdrawal for your first home is a straightforward process, and is administered through your KiwiSaver scheme provider or fund manager. If approved, the funds will be paid to your solicitor on or before settlement day.

First Home Loans – with Kāinga Ora

With a First Home Loan, getting into your first home is that much easier as you only require a 5% deposit. These loans are offered by selected banks and lenders, underwritten by Kāinga Ora, enabling these lenders to provide loans beyond standard lending criteria.

Along with requiring a 5% deposit, you need to meet the following criteria to be eligible:

• Be a New Zealand citizen, permanent resident, or a resident visa holder who is “ordinarily resident in New Zealand”
• Be a first-home buyer or a previous home owner in a similar financial position to a first-home buyer
• Have a before-tax income from the last 12 months of:
  • $95,000 or less for an individual buyer without dependants; or
  • $150,000 or less for an individual buyer with one or more dependants; or
  • $150,000 or less (combined) for two or more buyers, regardless of the number of dependants
• Intend to live in the property as your primary residence

Each lender will have its own lending criteria, taking your financial ability, existing debt, and credit history into account.

Participating First Home Loan lenders:

• Westpac
• Kiwibank
• The Cooperative Bank
• SBS Bank
• Unity Money
• NBS
• NZ Home Loans

First Home Grants – with Kāinga Ora

Building on the ability to withdraw your KiwiSaver funds, you may also qualify for a First Home Grant, which can provide a substantial boost of up to $10,000 towards your first home.

Several eligibility criteria determine your qualification for the First Home Grant, offering detailed information here. This grant is applicable to both newly constructed residences and existing properties, with the purchase amount contingent on your specific region. For new builds, obtaining pre-approval before land acquisition is essential, while established properties provide a grant of $1,000 for every three years of contributions. Just like the KiwiSaver withdrawal, it’s a prerequisite that the home you’re buying serves as your primary residence for at least six months.

What’s the next step in your home buying journey?

In conclusion, embarking on the journey to homeownership in New Zealand can be an exciting and attainable goal, especially with the right knowledge and resources at your disposal. Securing your deposit, whether through savings, KiwiSaver, First Home Loans, or grants, opens doors to fulfilling your dream of owning a home.

As you explore these avenues, remember that guidance from financial advisers, mortgage experts, and government agencies like Kāinga Ora can provide invaluable assistance. Don’t hesitate to reach out, ask questions, and seek personalised advice tailored to your unique situation.

Now, armed with the knowledge of deposit options and financial assistance available, take the first step towards homeownership. Start your journey today and turn your dream of owning a home in New Zealand into a reality. Your future home is waiting – make it yours!

Ready to begin your homeownership journey? Contact our team today to explore your options and take the first step towards owning your dream home.