Buying a home is a major goal for many Kiwis – but with some lenders requiring a 20% deposit, it can be tough to save the full amount needed. However, the New Zealand government’s First Home Grant can help.
Offering a leg-up to first-time buyers, the grant is designed to stimulate the economy and support first home buyers to enter the property market.
Here’s what you need to know about how the First Home Grant can turn your homeownership dreams into reality.
What is the first home buyer grant?
The First Home Grant (formerly known as the HomeStart Grant) is a sum of money given to eligible homebuyers looking to buy a house in New Zealand. You do not have to repay this sum and joint buyers may combine their benefits.
How much is the first home buyer grant?
If you are entitled to a First Home Grant, the sum you receive will depend on the type of property you are buying as well as your financial circumstances.
Each eligible borrower may receive sums starting from $3,000. For those who have paid into their KiwiSaver for at least five years, this can range up to $10,000. In most cases, you are eligible to receive $1,000 per year for each year that you have contributed, as long as you have done so for three years or more.
If you plan to take money out of your KiwiSaver, you must leave at least $1,000 in your account and must also have been making minimum payments for the past three years. Each KiwiSaver scheme has different withdrawal requirements, so it’s a good idea to contact your scheme directly to find out exactly how much you may be able to withdraw.
If you have at least a five per cent deposit, you may be eligible for a First Home Loan (formerly known as a Welcome Home loan) through a bank or lender. First Home Loans are underwritten through Kāinga Ora – Homes and Communities and can help borrowers with small deposits to secure loan approval without the standard 20 per cent deposit.
Who is eligible for a first home buyer grant?
If you’re considering applying for a First Home Grant, it’s important to check that you meet the eligibility requirements. This includes:
- You are a New Zealand resident
- You are over the age of 18
- You do not currently own a property
- You must live in the property for at least six months
- You have contributed to your KiwiSaver for three consecutive years
- You have not received the First Home Grant before
- The property is priced at or under the current price caps in your region
- The property you’re buying meets the relevant lender requirementsThe First Home Grant is only available to those who earn less than the current income caps. For a single buyer, earnings are capped at $85,000 over the last 23 months. For joint buyers, the limit is $130,000.
Usually, you must have at least a five per cent genuine savings deposit. However, in some cases, you may also use gifted or inherited funds. Depending on your financial situation, you may need to have a guarantor sign to secure your loan.
Kiwis who have owned a home before but do not currently may still be eligible for the First Home Grant as a “second-chancer” if they have similar circumstances to a first-time buyer.
Does the home price affect if I can use a first home buyer grant?
The sum you may be eligible to receive from a First Home Grant will vary depending on your region, as well as whether you are buying an existing property or a development property.
Under the scheme, you can only apply for a First Home Grant if you are buying a property valued at $600,000 or less in Auckland or Queenstown. If you are buying in another major city, the price is capped at $500,000. In the regions, the limit is $400,000.
If you are buying a new or development property to build on, the regional price caps are approximately $50,000 higher. It’s worth noting that these caps are subject to change, so be sure to do your research on the current figures for your specific area.
Can I use a first home buyer grant on an existing property?
The First Home Grant can be used to buy either an existing property or a vacant development property to build on. Grants cannot be used to buy investment properties, and you cannot apply for retroactive grant funds on a first home that you already own.
If you own a home you can no longer afford and choose to sell and buy a more affordable home, you may be eligible for the grant – provided you meet the eligibility criteria. This also applies if you have lost a former home due to an inability to pay your mortgage but are now able to afford a new home. However, you may only receive a First Home Grant once.
Is the application for a first home buyer grant complicated?
Completing an application for a First Home Grant isn’t overly complicated – but it’s a good idea to seek pre-approval before you start looking at properties. Approval can take around two to three weeks, and it’s important to remember that you cannot apply for grant funds retrospectively after the property has been purchased.
If you’re applying for a First Home Grant and are using your KiwiSaver First Home Withdrawal, you will need to fill out two separate applications. As part of the process, you must also provide:
- Identification (a passport, driver’s license or birth certificate, as well as proof of residence, like a recent utility bill)
- Proof of income (all parties applying for the grant will need to show proof of their total income over the past 12 months, as well as their two most recent payslips)
- Kiwisaver statements (or statements from a complying fund or exempt employer scheme. You will need to show that you have been making minimum payments for at least three years)
- Purchase agreement (not required for pre-approval. You will need a signed copy of an agreement for sale and purchase, or a fixed price building contract)
- Proof of deposit (not required for pre-approval. You must be able to show you have a 10 per cent deposit)
- Proposed settlement date (not required for pre-approval. You must provide a proposed settlement date/grant payment date that is at least four weeks away).
Do I need to work with a real estate agent or mortgage broker to receive a first home buyer grant?
While a real estate agent can support you to buy a property, a mortgage adviser is positioned to help you to apply for a First Home Grant. With a comprehensive knowledge of the home buyer grants and access to a range of lenders, a mortgage adviser can walk you through the process from start to finish.
Even if the property exceeds the maximum value eligible for a grant, a mortgage adviser can help you explore your options and leverage your status as a first-time buyer. Whatever your situation, they can work with you to find the best solution for your individual circumstances.
So, be sure to take advantage of this great opportunity to fast track your home buying journey and get a foot on the property market ladder. Contact a Mike Pero Mortgage Adviser today and happy house hunting!