The Reserve Bank Loan-to-Value Ratio (LVR) restrictions put in place in October 2016 seem here to stay for quite a while yet. The major political parties have made some noise about them being lifted, but it does not look like the reserve bank governor is taking any notice, and they are here to stay for the foreseeable future. So, if you are looking to buy your first home, the requirements to get a mortgage approved is still a complicated maze of paperwork and processes to meet the criteria for approval. Anything which involves dealing with a government department is usually complicated with information overkill, and the Welcome Home Loan scheme is no different. However, with some perseverance and a large amount of effort, and enough paperwork to destroy a small forest, you can get there in the end.
With the LVR restrictions in place, most lenders are currently requiring a minimum 20 per cent deposit. With an average sale price in Rodney of around $700,000, that’s a $140,000 deposit required. But with a Welcome Home Loan you only need a 10 per cent deposit, which means getting into your first home is that much easier. The Welcome Home Loan scheme has been changed many times since its inception with the price caps being lifted and the home start grant amounts being increased.
The changes have been designed to help people achieve the dream of buying their own home. If you are thinking of buying your first home in the next five years then my recommendation is to have a look at these changes and start to put in place an action plan for the things you need to do. KiwiSaver is a great way to help you get on the property ladder. By starting your planning now you can be well on your way to home ownership.
There is no doubt that it’s become a whole lot harder to buy a first home with the higher deposit requirements, however if your savings are taken out of your pay before you get them, then it’s so much easier. The KiwiSaver HomeStart scheme has some great benefits, which kick in once you have been a member for three years, which isn’t very long.
HomeStart provides eligible first home buyers with a grant of up to $5,000 for individuals and up to $10,000 for couples to put toward a deposit for an existing built home. For those buying or building a new home, a HomeStart grant will provide eligible first home buyers with a grant of up to $10,000 for individuals and up to $20,000 for couples to help with the costs of building or purchasing. This can include a vacant residential section on which a new home will be built, house and land packages purchased off the plans, a new apartment purchased off the plans or a newly-built property that has received its building code compliance certificate less than six months before the date of the buyer’s application.
The maximum income thresholds for grants and Welcome Home Loans have also changed ($85,000 for a single buyer, $130,000 for a joint buyer) and the house price cap has increased so more first home buyers will be eligible for the scheme.
The house price caps for grants and Welcome Home Loans vary by region: The Auckland cap has been increased to $600,000 maximum purchase price for existing homes or $650,000 if you are building. This includes Warkworth and surrounds up to Wellsford and anywhere under Auckland Council.
So if you have aspirations to buy your first home within the next five years, then I urge you to check out these changes and start your planning now. More information can be found at welcomehomeloan.co.nz or speak to your financial advisor.
by Grant Clifton