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Saving for a First Home Deposit

02.04.2020

There’s a popular idea out there that young Kiwi’s will never be able to buy their own home. But, while some are complaining about house prices, other young Kiwis are out there taking advantage of the different schemes available to help them get into their first homes. From KiwiSaver to KiwiBuild, budgeting to banks, here are some hacks we’ve seen Kiwi’s use to make that homeownership dream a reality.

First Home Grant

If you qualify for a First Home Grant, you could get a cash payment to contribute to the deposit of your first home. To qualify, you’ll need to have contributed to your KiwiSaver for at least the last three years, not be a current home or landowner and sit within certain income levels.

The home you’re buying will need to fall under a certain price threshold too, which varies by region. These are the major conditions, but there are several more, and a professional advisor will be able to explain them to you in more detail.

Here’s a tip: a good way to maximise your First Home grant is to use it on a new build. As of 2020, while buying an existing house will net you between $3,000 -$5,000, you can receive anywhere from $6,000 - $10,000 for a new build. Additionally, the ‘affordability’ threshold is higher for new builds, so you’ll end up with more money to contribute to a home that’s worth more—a win-win.

 

KiwiSaver 

Even if you don’t qualify for the First Home Grant, you should be able to withdraw some of your KiwiSaver balance to put towards your first home deposit. Like with the First Home grant, there are some conditions that must be fulfilled first. You’ll need to be a first home buyer who has been a KiwiSaver contributor for over three years. The major caveat to this scheme is that you must live in the home you are buying—you can’t rent it out and treat it as an investment property.

 

Make a Budget 

The best hack to reaching your home deposit goals faster is by beefing up your own personal savings. Set a savings goal and stick to it. This involves making sacrifices, like passing up those cheap flights to Hawaii, cooking your own meals, living in a smaller rental or even living with family if it's an option. Sorted has this awesome budgeting tool to help get you on your way.

 

Low Equity Margins

There is a common misconception that you need a 20% deposit to get approved for a home loan. However, some clever Kiwi’s are leaving the rental rat race years early and owning their own home with a 10% deposit – and sometimes even less. A Low Equity Margin (LEM) is a percentage added to your interest rate that remains there until your loan reduces to the 80% threshold.  

Although a LEM adds to the interest rate of your mortgage, you may end out saving in the long term by being on the property ladder and not paying rent in this time. A House & Land Package is a good option if you're considering a LEM. You'll pay a deposit up-front and only begin your mortgage once your build is complete, usually in about 18 weeks. In 18 weeks of hard savings, you may be able to get even closer to that 80% threshold. 

KiwiBuild 

KiwiBuild works to make more new homes available to more New Zealanders. KiwiBuild home are designed to remain within reach of new home-buyers and so each KiwiBuild home must be sold under the price-cap. And since they are new builds, you will qualify for the additional money that entails through the First Home Grant detailed above. The flipside is, you’re limited to the homes available within the scheme which are in only in certain locations around New Zealand. 

 

Partner with us for your first home

Classic Builders is well-known for being a top choice for first home buyers. Our House & Land Packages are often some of the best priced on the market, plus we have over 20 years experience building homes for first home buyers. Get in touch with us today to get the ball rolling and get into your first home sooner.