More Help For First Home Buyers

At Lifetime, we believe strongly in the financial benefits of homeownership. We also support the old rule of thumb ‘the sooner you own the better!’ That is why we were interested to note the new eligibility rules for the Kainga Ora First home grant. These changes could help you or someone you know, achieve that important life stage sooner than expected.

The most notable revisions we've seen here are in the overall house price caps, which have been increased for new builds. Hopeful and future first homeowners will benefit since they will now be able to access the grant for a broader range of property values. There are some options available for purchasers to consider that may allow them to move into their first home sooner than before. Kainga Ora's first home offerings include various forms of government assistance, as well as using your KiwiSaver as part of your deposit.

Kainga Ora First Home Grants are provided by the New Zealand Government to assist eligible first home buyers with extra funds towards the deposit for their first home. The eligibility criteria was changed in the recent Budget 2022 with the purpose to help first home buyers get on the ladder quicker than before.

What are the income limits for first home buyers applying for a First Home grant?

As an individual:

• If you are purchasing a property on your own, you need to have earned $95,000 or less (before tax) in the last 12 months to be eligible for a First Home Grant.

As a couple/group:

• If you are purchasing a property as a couple or a group of purchasers, your combined income must have been $150,000 or less (before tax) in the last 12 months.

These have both been increased to accommodate for growing salaries as well as the increasing need for serviceability requirements by the banks.

What is the maximum amount I can receive from a KiwiSaver First Home Grant?

The maximum amount that you can get towards your first home deposit depends on a couple of things:

• How long you have been actively contributing towards your KiwiSaver – it requires a minimum of three years of contributions and the benefit increases per year, up to five years. If you have contributed beyond the five years you will receive the maximum amount.
• Whether you are looking to purchase an existing home or build from the ground up. If you are looking to purchase an existing home, then you may be eligible for $1,000 per year that you have actively contributed to your KiwiSaver up to $5,000. Whereas, if you were to build new, then you could receive $2,000 per year up to $10,000.

This First Home Grant is only available to Kiwis that have not yet owned or recently settled on a section or property; therefore, it is vital to know about the grant and if you are eligible before making any offers in the market. In some cases, this could increase your deposit up to 5%.

Can I use the First Home Grant to purchase any home?

The First Home Grant has house pricing caps that are specific to regions in New Zealand. While these caps have been restrictive in the past to house prices that might afford a small apartment or semi-detached home, these have now been significantly increased for new builds in the latest Budget 2022, providing a broader range of potential homes for Kiwis to choose from.

• The Auckland region increased its price cap to $875,000 for both new and existing homes.
• Wellington has increased to $750,000 for existing and $925,000 for new builds.
• Christchurch increasing to $550,000 for existing homes and $750,000 for newly built homes.

You can check out your local house price cap here. 

First Home Loan & First Home Partner

If you want to get into your first home but don’t have a large enough deposit or are struggling to build one up, Kainga Ora provides some options to help:

• The First Home Loan. This lowers the required deposit for first home buyers to only 5% with many of the large banks in the industry. Having the ability to access the First Home Grant and a mortgage that is underwritten by Kainga Ora breaks down the entry barriers to home ownership. This can make the difference between a goal and a realistic option for many New Zealanders.
• First Home Partnership Scheme. This allows the potential first homeowner to partner with Kainga Ora to purchase a property that they can live in and feel comfortable about not paying rent for someone else. This scheme works by having Kainga Ora purchase a property with you (up to 25% or $200,000 whichever is lower) resulting in them owning a portion of the property until you are in a financial position to buy out their share of the property. This option should be seen as a last resort due to taking on the risk of servicing the mortgage (bearing in mind there may be other options out there that can help you into your first home).

Can I use my KiwiSaver to get into my first home?

This is a great option that all Kiwis should investigate. While KiwiSaver is primarily a retirement savings scheme promoted to help Kiwis enjoy their lives while not earning an income in retirement, it can also be used towards a first home deposit. If you are currently working and contributing towards your KiwiSaver, you may be entitled to a minimum employer contribution of 3% and a government contribution of $521 per year. These external contributions can also be used towards your deposit, which is what really makes KiwiSaver shine as a tool to help build your deposit faster than by saving directly into a bank.

Am I in the right KiwiSaver fund?

What we know is that being in the right fund is the single biggest factor to a successful KiwiSaver. There are five main types of Funds when it comes to your KiwiSaver, these are Conservative, moderate, balanced, growth, and aggressive funds. Knowing the differences between these types of funds and what you specifically are invested in could be the difference between having a 15% deposit or a 20% deposit in 5 years. Conservative funds generally invest more into less volatile assets such as bonds and cash equivalents, whereas the growth style funds invest more into the riskier types such as shares of companies, which tend to provide more return on investment over the long-term (typically five years or greater). However, when it comes time to withdraw from your KiwiSaver, you don’t want to see your balance yoyo-ing up and down. This is where meeting with a financial adviser to review your KiwiSaver’s investment strategy is key – to ensure you are maximising your benefits and provide you with confidence that you are on the right track.

There is a lot to consider when getting first-home ready. Make sure you get some help from your financial adviser to set a realistic goal for when you could be a homeowner and then learn how we can help to make it a reality.

Article by Riki Carston

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Disclaimer: This article has been prepared for the purpose of providing general information, without taking into consideration any particular investor’s objectives, financial situation or needs. Any opinions contained in it are held by the author as at the report date and are subject to change without notice.