First-home buyers guide to raising a deposit
There aren’t many things more daunting than being a first-home buyer in Auckland’s current market. Right or wrong the perception is that many people will never make the leap into home ownership. We don’t blame those who look at the loan-to-value ratio restrictions set by the Reserve Bank and sigh in despair. What’s a 20 percent deposit on a million-dollar home? More than you can save by putting away $350 a week for 10 years.
With this as the backdrop many of us are thinking of asking our olds if they wouldn’t mind (pretty-please!) giving us a helping hand. There are other options though and we think it’s a good idea to explore these first.
If you’ve been a Kiwisaver member for more than three years you’ll be able to withdraw funds from your account to help you into your home. There are some restrictions but basically you can withdraw any personal and employer contributions, tax credits, and any investment gains you’ve made while being in the scheme. There’s more good news - if you’ve been a homeowner before but are in the same financial position as a first-time buyer you may still be able to use your Kiwisaver.
Welcome Home Loan
If you’ve got a 10 percent deposit and meet certain criteria you could be eligible for a welcome home loan. This is where certain banks and lenders will loan you 90 percent of the purchase price for a house and the government underwrites the lending. This is a good option for those who have some savings but are struggling to reach the 20 percent threshold.
The Government will give you up to $10,000 for the purchase of an existing home, or $20,000 for a new home. As with all “free” money you’ll need to meet the eligibility criteria, including having been a member of Kiwisaver for at least 3 years. $20,000 could go a long way to getting you where you need to be so it’s worth finding out whether you qualify.
Shopping around for your lending
Believe it or not some banks offer 90 percent lending to buyers in certain situations. The LVR restrictions still allow for a small proportion of new lending to take place in cases where buyers have less than a 20 percent deposit. It’s worth checking in with your bank (and others) to see if this is an option for you.
If you’re reading this and thinking that it still won’t cut it, your parents have a few options to help you out. These include taking out a loan against their house, being a guarantor, and using the equity in their home to help you. In our next blog we’ll explore how each of these work.
If you’d like to find out more call Niran or Vinay on 09 320 3730.