Saving for a first home deposit – smashed avocado and all
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 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, and 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 threshold—which varies by region—to qualify as an ‘affordable home’ under the scheme. 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.
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. Going for a LEM is a particularly great idea for turn-key house & land packages. Turn-key means you 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.
The KiwiSaver First Home Withdrawal
Even if you don’t qualify for the First Home grant, you should also be able to withdraw your KiwiSaver balance to put towards your first home deposit. Investing your KiwiSaver in a property that will gain value over time is a great way to ensure a comfortable retirement and can be a more valuable investment.
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 (and stick to it!)
The best hack to reaching your home deposit goal is faster is 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 that is an option. Sorted has this awesome budgeting tool to help get you on your way.
Kiwibuild homes and other new builds
Kiwibuild homes are often a good choice if you want to qualify for these schemes. There is a value cap on Kiwibuild homes that is under the threshold to qualify for a First Home grant, and since they are new builds, you will qualify for the additional money that entails. The flipside is that you’re limited to the specific designs and locations in the KiwiBuild scheme.
The Classic Builders touch
When you need your home to cost a certain amount to qualify for the First Home grant or KiwiSaver withdrawal, it helps if the price the builder gives you won’t change on the fly. That’s where Classic Builders comes in—we’ve carved out a niche in the market by offering quality, affordable homes at a fixed price.
We’ve got plenty of house and land packages coming in at under $550,000, which would usually qualify you for the First Home Grant. When you build with Classic Builders, you also know that you’re buying a quality build that will last. We’re so sure of that that we offer a 10-year structural warranty so you can have peace of mind while living in your brand new home.
Let’s put it all together
Let’s say your Classic Builders house & land package sits at $550,000. Here’s how your 15% deposit of $55,000 may look:
KiwiSaver Withdrawal: $25,000
Personal savings: $10,000
KiwiSaver HomeStart Grant: $20,000 – two people contributing for five years each.
KiwiSaver Withdrawal: $20,000
Personal savings: $15,000
KiwiSaver HomeStart Grant: $10,000
Family gift: $10,000
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 the backing of over 20 years building homes for first home buyers. Get in touch with us to get the ball rolling and get on the property ladder today.