House prices in today’s market are being pushed to record levels, leaving those unable to build a substantial deposit in the lurch. Just when all the doors to the housing market seem to be slammed shut for first home buyers, the Government has introduced a new initiative that could be of some help: the First Home Partner scheme.
Helping first home buyers get into brand new homes, we reckon this might be a hit with avocado on toast loving millennials.
What is the purpose of the scheme?
The First Home Partner scheme is specifically designed to help Kiwis into new homes that have not been previously owned or lived in. The scheme cannot be used to buy land to build on, and you won’t be eligible for the scheme if you already own land.
Who is the scheme for?
It’s for Kiwis who can afford to pay a mortgage but are struggling to gather a large enough deposit for a property in the current climate. The First Home Partner scheme eligibility criteria is simple, applications can be made individually or by multiple people who:
Are over 18 years old
Are NZ citizens, permanent residents, or resident visa holders who ‘ordinarily reside in NZ’ as well as those married/in a civil union with someone applying who meets these citizenship/residency requirements
Have a total household income before tax of no more than $130,000
Have a good credit rating (subject to a credit report)
Are first home buyers
Have not previously received shared ownership support from Kainga Ora
How does it work?
If successful upon application, the First Home Partner scheme allows Kiwis to purchase a new house in shared ownership with Kainga Ora. Kainga Ora takes an equity share in the property while the home buyer/s occupies the property and is the majority owner. Buyers must commit to living in the property as their primary place of residence for a minimum of three years from settlement, then, over 15-25 years, they’re expected to buy the share off Kainga Ora to own the property outright.
To buy a property under the scheme, you only need to have a 5% deposit saved and Kainga Ora will then either make a maximum contribution of 25% of the property price or $200,000 (whichever is less). Of course, you will also need to meet the lending requirements of a participating bank (currently BNZ or Westpac) to receive a home loan. And although Kainga Ora technically owns part of the property, you’re also responsible for all the legal and other typical costs that are involved in purchasing a house, such as conveyancing, LIM and builder’s reports. You also need to cover all costs related to owning a home like rates, insurance, and maintenance.
How does the 5% deposit work?
Kainga Ora will ask for evidence that you meet the deposit requirements as part of your application for the scheme. The deposit money can include any savings, money from your Kiwisaver and, if you’re eligible, money from the First Home Buyers grant.
So, what’s the catch?
No catch, just some obligations. Kainga Ora requires you to have annual meetings with them to work towards you owning the house in full. You’ll also have to seek permission from Kainga Ora before making any improvements, renovations or if you want to sell your home. As mentioned earlier, the scheme states that you should aim to have full ownership of the house within 15 years, but you do have until 25 years after settlement to officially do this – it just comes with an annual service fee to Kainga Ora from years 15+ onwards.
It’s important to note that when buying back the share of the property from Kainga Ora, you will need to pay them the then-market rate, meaning Kainga Ora will receive the benefit of any increase in equity during the time they own a share of your property.
Interested in the scheme? Check out the process here at Kainga Ora’s website.
And regardless of whether you’re thinking of purchasing a home through the First Home Partner scheme or in another way, the iCLAW team are here to help you get your foot on the property ladder. Connect with one of our team today and we’ll guide you through the process.
Photo Credit: Sandy Millar