Making Finance Easy
Securing finance is a crucial step for most people when looking to build a new home and it can be hard to know where to start.
At Today Homes we’re committed to working with you right through the building process and organising finance can be one of the critical steps so our experienced team are ready to talk you through what can seem a complex process to make finance easier.
To start here’s some background and FAQ that can help with your decision making about your finance options.
How do I start thinking about building finance?
If you have already saved a deposit, that is a great achievement.
There are options available, however, if you are finding it difficult to save the deposit required for a home loan.
These include withdrawing funds from your Kiwisaver account and applying for a Kiwisaver HomeStart Grant for first time buyers. You may also be eligible for a low deposit loan through Housing New Zealand.
Applying for a Housing New Zealand HomeStart Grant
What are the HomeStart grant eligibility criteria?
To be eligible for a Kiwisaver HomeStart grant you need to be aged 18 years and over and be a member of a Kiwsaver scheme or another complying superannuation fund or exempt employer’s scheme.
You must have been making contributions to your scheme for at least three years and you need to have been contributing at least the minimum percentage of your total income from all sources (the minimum level is currently set at 3%).
You can only receive a HomeStart grant if you are purchasing your first home and you have not already received a HomeStart grant previously.
What are the income limits for first home buyers applying for a HomeStart grant?
If you are purchasing a property on your own you need to have earned $85,000 or less (before tax) in the last 12 months to be eligible for a HomeStart grant.
If you are purchasing a property as a couple or a group of purchasers, your combined income must have been $130,000 or less (before tax) in the last 12 months.
What is the maximum amount I can receive from a Kiwisaver HomeStart grant?
The maximum amount you can receive depends on how many years you have been contributing to your Kiwisaver or other qualifying scheme. For building a new home, the grant is calculated at $2,000 per year per individual, whereas if you are purchasing an older, existing property the grant is capped at $1,000 per individual for each year of contributions.
This means that if you have been making contributions to your Kiwisaver scheme for 3 years you will be eligible for a $6,000 grant to help you build a new home; and after 4 years of contributions you can receive $8,000. After 5 years of more of contributions you are eligible to receive the maximum grant of $10,000 as an individual, or $20,000 for a couple if both partners qualify, to put towards your deposit or purchase of your new home.
Is there a limit on the value of the home I can purchase using a HomeStart grant?
The maximum price for a first home purchase using a HomeStart grant varies according to the region of New Zealand.
For homes in Christchurch City and the Selwyn and Waimakariri Districts, the purchase price caps are $500,000 for an existing property and $550,000 for a new property.
Can I use a HomeStart grant to buy a new home that has already been built?
You can purchase a brand new home that has already been completed as long as it has received its building code of compliance certificate less than six months before you apply for a Kiwisaver HomeStart grant.
Can I use a HomeStart grant to purchase land?
If you are planning on buying land to build on you will need a signed purchase agreement for the land and have funding approved for the construction of the home with a fixed price contract for the build. The grant must be used towards the land purchase and not the build costs. Some people have been caught out when they have tried to apply for a grant to build a home on a section they already own but have found they do not qualify.
How long should I allow when applying for a HomeStart grant?
Housing NZ requires at least 20 working days from receiving an application through to paying out the HomeStart grant.
However it is recommended that you obtain pre-approval for a grant early on (either before or when seeking finance pre-approval) as this makes the process of purchasing a property more straightforward. Pre-approval lasts for six months for a HomeStart grant.
Withdrawing Kiwisaver funds to buy your first home
In addition to applying for a Kiwisaver HomeStart grant, first time buyers can also apply to withdraw all of the funds in their Kiwisaver account except for the $1000 kickstart payment that they received from the government when they joined the scheme.
What are the requirements for withdrawing Kiwisaver funds to purchase a first home?
As with the Kiwisaver HomeStart grant, you need to have been a Kiwisaver member for at least three years in order to be able to withdraw your funds.
Can I use my Kiwisaver funds to purchase an investment property?
You can only use the Kiwisaver withdrawal provision to purchase a property that you intend to live in, not an investment property.
What is a second chance Kiwisaver home loan?
If you have owned a home before but have not accumulated assets greater than 20% of the house price cap for your area you can apply for a second chance withdrawal through Housing New Zealand.
Today Homes are here to help you with all the decisions you’ll be faced with when making your new home a reality. Talk to one of our New Home Consultants today about your finance questions – or anything else you need to know about building with us.
Applying for a Welcome Home Loan
A Welcome Home Loan is a low deposit home loan designed for first home buyers. Purchasers only require a 10 per cent deposit instead of the usual 20 per cent deposit.
Welcome Home Loans are offered by a variety of lenders including banks and are underwritten by Housing New Zealand.
You can use your Kiwisaver withdrawal and HomeStart grant (if eligible) towards your deposit.
What are the eligibility criteria for a Welcome Home Loan?
To be eligible for a Welcome Home loan your annual household income must be $85,000 or less for a sole purchaser or $130,000 or less for two or more borrowers.
The purchase price cap for new and existing properties is the same as for a HomeStart grant and you must intend to live in the property, not rent it out.
Are there any extra costs associated with a Welcome Home Loan?
A lender’s mortgage insurance premium of 1% applies to low deposit home loans but this fee can normally be added to the balance of your loan.
Depending on your lender you may also be charged a loan application fee.
Getting good advice on how best to finance your new build
A finance broker can work with you to help you decide on a budget and choose the best mortgage structure and lender to suit your situation. They normally work with a range of banks and other lenders and they are remunerated by the lender so the service is provided at no cost to you.
Today Homes works with the following finance brokers:
Focus Mortgage & Insurance
Your solicitor will also be an important part of your journey to purchasing your new home and can assist you with the completion of the necessary paperwork relating to Kiwisaver withdrawals and HomeStart grants.