On April 1st this year the KiwiSaver HomeStart grant replaced the First Home deposit subsidy in an effort to help more first home buyers get onto the property ladder.
We discuss some of the eligibility criteria for HomeStart and what you can get from this new grant.
What does the new HomeStart grant offers first home buyers?
For the purchase of an existing home, the new grant offers a maximum of $5,000 to individuals and $10,000 to couples. In the case of building or purchasing a brand new home, this doubles to $10,000 for individuals and $20,000 for couples.
This is a grant (gift) provided to first home buyers – it is not a loan that needs to be repaid and is offered in addition to any money that you are able to withdraw from your KiwiSaver account.
In order to apply for the new HomeStart grant, you will need to have been a member of a KiwiSaver Scheme, complying fund or exempt employer scheme for at least 3-years and fit within the salary limit which is a maximum of $80,000pa for singles and $120,000pa for couples. The salaries are determined by what you earned over the past 12-months.
In addition, first home buyers must intend to purchase a property in their personal name(s), rather than that of a family trust.
For more eligibility information including how asset values apply, visit the Housing New Zealand website.
What Qualifies As A Brand New Home?
The HomeStart grant recognises a brand new home as any of the following;
- A vacant residential section on which a new dwelling will be built
- A house and land package purchased from plans
- A new apartment built from plans
- Any dwelling that has received its building code compliance certificate less than 6-months before the buyer’s application
Regional Price Caps For House Purchases
HomeStart grants like the previous First Home deposit subsidy is only available to houses that fit within certain pre-set regional price caps. These vary by region to reflect property values.
When buying land only, add a given building contract price to a land price to work out whether the total price is within the cap for that region.
Regional limits are set out as follows:
- $550,000 for Auckland
- $450,000 for Christchurch City, Hamilton City, Hutt City, Kapiti Coast, Nelson City, Porirua City, Queenstown City, Selwyn District, Tasman, Tauranga City, Waimakariri, Wellington City, Western Bay of Plenty and Upper Hutt
- $350,000 for the rest of New Zealand
There are three situations for first home buyers and each is a little different;
1: When Buying An Existing / Already Built House
A HomeStart grant must be paid directly to the vendor as part of the purchase price at settlement. If the grant does not process in time for settlement (it may take up to 10 working days), funds from another source such as a family loan may be used to settle, but the grant funds must be returned to Housing New Zealand as they cannot be used to repay a personal loan.
Additionally, a HomeStart grant cannot be used as part of a deposit to be paid to an agent – it can only be used at settlement.
2: If You Buy Land To Build Your First Home
With all applications, a copy of the fixed price building contract that includes the anticipated construction completion date must be included. This is also almost always a requirement of the banks when lending to people for building a new home as it provides some certainty that the costs are not going to blow out / change.
Within most fixed price building contracts there will be some PC sums. A prime cost sum (PC sum) is a term given to an estimate where the actual cost has yet to be determined and you need to pay close attention to these to ensure that you will not be hit with additional costs that have not been allowed for, and therefore often these is no financial allowance for these.
Payments are generally progressive throughout the build and a copy of the code compliance certificate must then be provided on or before the completion date and date of the final payment.
3: Buying A Home Off The Plans
You will need to state a construction completion date in order to be considered – and to commence residing in the property from the settlement date where you must live for at least 6-months.
These are known as “turn key” packages – essentially you are required to pay a deposit and then the remainder of the purchase price is paid when the house is complete and ready to move into.
Mortgage brokers in Auckland are now arranging a lot of finance for first home buyers, but also for people building new homes. Unfortunately it is hard in Auckland to find land and to build a new house while keeping under the price cap of $550,000 and therefore the HomeStart grant will often not apply.
Regardless of this, first home buyers can still withdraw their KiwiSaver and any loans to build a new house are exempt from the LVR rules and therefore you can finance a new build with just 10% deposit or maybe even less provided you can afford the mortgage.
Building a new house can be exciting and frustrating too. It is always a good idea to speak to mortgage brokers, builders and people that have done this before so you can identify areas that can cause issues and frustrations.
These Changes Are Great News For First Home Buyers
These changes are great news for first home buyers, providing a greater range of options to reflect the many home owning aspirations of young New Zealanders. It has and will no doubt always be hard for first home buyers who may struggle to save a large deposit, but it should be good to know there are some alternatives available to help.
Visit Housing New Zealand’s HomeStart grant website for everything you need to begin.
If you would like to discuss any matters related to buying and selling residential property, please contact your mortgage broker who can explain the process and help you navigate your way into your first home using the KiwiSaver and the new HomeStart grant.