The first home grant is gone, what other help is out there?

Saturday, 25 May 2024

The Government this week scrapped the First Home Grant scheme, which gave eligible house hunters $5000 towards an existing home or $10,000 for a new home.

Political (and public) views on the scheme’s demise were split.

Housing Minister Chris Bishop said the grants were “an expensive and inefficient way to support first-home buyers,” but Labour housing spokesperson Keiran McAnulty argued ministers had underestimated how meaningful they were for first home buyers.

Whether you thought the grants were a good idea or not, they’re gone. So what other help is out there for first home buyers?

Shared equity/ownership

It probably isn’t the first funding option that springs to mind for house hunters hoping to get on the property ladder, but shared equity is becoming more common in New Zealand.

Also known as shared ownership, a shared equity arrangement is when an aspiring home owner teams up with a third party ‒ like the Government, a council or iwi ‒ to get a mortgage.

With a traditional mortgage, the buyer would put down a deposit and the lender would provide the rest.

With shared equity, the third party (or co-owner) contributes a chunk of the property’s value and owns a corresponding share of the home.

The buyer can then purchase that share over an agreed period of time or, if the property is sold before that happens, pay the co-owner a percentage of the sale price equal to their share.

Family equity loans

In a similar vein, a family equity loan could be an option if you have rellies who own property and are keen to help you get into your own place.

It’s a two-loan setup, with one for the amount of the deposit (say 20%) and the other for the balance (80%).

The first loan (for the deposit) is in your name, as well as your family member’s name, and is over a shorter term so it is paid back sooner and your folks (presumably) are off the hook.

The second loan (for the other 80%) is in your name only and usually for a 30-year period.

Your family’s finances will have to be up to scratch as well as your own, because if you get into strife and can’t meet your repayments, they’ll become liable for the first loan.

Kāinga Ora First Home Loan

Not to be confused with the now-scrapped grant, First Home Loans are another government scheme to help first home buyers close a deal.

The loans are underwritten by Kāinga Ora, which means banks can be more flexible about lending.

To qualify, you’ll need to be a first home buyer or a previous home owner in a similar situation (because sometimes life is like a game of Snakes and Ladders) and have a 5% deposit.

That deposit requirement is a huge deal. Most banks require a 20% down payment, meaning would-be buyers need to find a $158,000 deposit for a $790,000 home (the current national median price). A 5% deposit, on the other hand, is a much more manageable $39,500.

KiwiSaver withdrawal

If you’ve been in your KiwiSaver scheme for at least three years, you might be able to use those savings to put towards your first home.

You can withdraw almost the whole lot ‒ your employer’s contributions as well as your own, the government contribution and any interest you’ve earned. You just have to leave $1000 in your account.

If you’re a “second-chance buyer” and previously owned a home, you might still qualify, as long as you haven’t used KiwiSaver to buy a property in the past. You can’t double-dip.