Without question the hardest part about buying your first home is getting a deposit together, particularly at the moment when the required deposit can be as much as 20%. If we look at the average NZ house price which is now just over half a million dollars that’s a whopping $100k needed for a deposit!
If you are a first home buyer and panicking at the thought of $100k, take a deep breath and read on, it’s not all bad news.
To start with you may not require the full 20% deposit. The Welcome Home Loan scheme only requires 10% and there are still some home loans available with only 5% deposit.
When it comes to getting a deposit together ‘there is more than one way to skin a cat’ as the old saying goes.
While there are other options to help get a deposit together, there is no way around it, you’ll probably have to save, hard, to get your first home. In a recent survey we did only a lucky 16% of people* were able to purchase their first home without some form of additional savings.
As of the 1st April 2015 KiwiSaver just got a whole lot better for First Home Buyers. There are two ways KiwiSaver can help you out: The first is KiwiSaver first-home withdrawl. If you have been a KiwiSaver member for at least three years you may be able to withdraw all, or part, of your savings to put towards your first home (excluding the Govt $1000 kick-start)
The second is through the KiwiSaver HomeStart grant which replaces the KiwiSaver first-home deposit subsidy. If you are purchasing an existing home you can get up to $1k per year you’ve been in the scheme, up to a maximum of $5k, or if you are purchasing a new home, a property bought off plans or land to build a new home on you can get $2,000 per year you’ve been in the scheme, up to a maximum of $10,000. Naturally there is some fine print so check it out on the Housing NZ website to see if you’re eligible or contact one of our consultants.
The great thing is that these amounts are per person – so if you’re buying as a couple you could potentially get up to $20,000 (for a new home) PLUS anything you’ve got saved in KiwiSaver (let’s say its $10k each) – that’s $40k already towards your deposit – happy days!
It wouldn’t be responsible of us not to mention that the drawback of withdrawing your savings from KiwiSaver is that you’re taking money away from your retirement savings so you’ll need to factor that in in future retirement savings planning.
Increasingly common these days is parents or family helping out to get people into their first home. This could be in the form of a gift (horray!), a loan (just remember you’ll still need to pay it back) or by going guarantor for your home loan.
It’s important for everyone involved to remember that a loan or going guarantor opens that party up to a great deal of risk if the house-buyer is not able to keep up loan repayments. Make sure everyone involved is aware of the risks and their responsibilities before signing on any dotted lines.
*NZHL Financial Habits Survey 2015
For more information about how New Zealand Home Loans can help you get into your first home, get in touch using the form below:
The information contained in this article is of a general nature and should not be taken as advice. It reflects the opinions of the writer only and does not necessarily reflect the opinions of New Zealand Home Loans.