Last month, we talked about Construction Lending for those interested in building their own family home. This month, I would like to continue with a hot topic for first home purchasers – the “Kainga Ora” option, which allows you to purchase your first home with just 5% of the purchase price.
If you fall into the category of a “first home purchaser” and are on a mission to save for a deposit, you’ve likely been informed that lenders usually require you to provide 20% of the purchase price for an existing property, or at least 10% for a new build, before they can further investigate the details of your home loan application. For example, for a house with a purchase price of $700,000, 20% would amount to $140,000, a substantial sum by anyone’s standards.
The Kainga Ora First Home Loan offers an option for those first-time home buyers who only have a 5% deposit. These loans are issued by selected banks and lenders, underwritten by Kainga Ora.
Please note that each participating lender will have its own interest rates and fees. One of these fees is to reimburse the lender for the Lender’s Mortgage Insurance Premium that Kainga Ora charges to insure each First Home Loan. This fee amounts to 0.5% of the loan amount, which can be added to the loan.
Eligibility
In addition to having a 5% deposit, you must:
- 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 homeowner 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
Source: First Home Loan :: Kāinga Ora – Homes and Communities
There are also other criteria such as;
- Purchasing a home for you to live in as your primary place of residence.
- Not owning any other property or land; this does not include ownership of Māori land.
- Purchasing a property of less than 1 hectare.
- Paying a 0.5% Lender’s Mortgage Insurance premium and loan application fee (if applied by the lender)
Apply for a First Home Loan
To apply for a First Home Loan, you need to choose a participating lender and meet their home loan application criteria. Please note that each lender has its own credit criteria, so it’s important to apply through a lender that understands and supports your application the most.
Compared to a standard home loan application, the First Home Application does have a process to go through, and there might be a few other criteria you’ll have to meet to be eligible.
You can book a chat with our advisor to find out whether a Frist Home Loan is an option for you or check out First Home Loan :: Kāinga Ora – Homes and Communities Kainga Ora’s official website for more information.
The First Home Partner Scheme
You might have also heard of the First Home Partner Scheme option. However, please note that due to high demand, new applications for this scheme will not be accepted from September 29, 2023, until further notice (we will provide more details about this option if it becomes available later on).
As always, we are here to help. Get in touch with the FloWealth team today.
* Disclaimer: We recommend that you seek personalized, professional advice from your trusted adviser before taking any action, as each applicant’s situation can vary. The above content is only general commentary.
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