When we started the Kiwi First Home Buyers Group over 10-years ago house prices were lower and the group was smaller. Over the preceding years the group has grown to about 60,000 members and we have helped answer so many questions about buying a first home, and seen the real frustrations that many people have too.
A common theme is how much you have to pay to buy a home – it’s expensive!
Many first home buyers are a little older now and already have a family. They therefore need more than a 1-bedroom apartment or flat but what they need just seems a bit out of reach. They cannot afford the mortgage that they would need to buy a home that would be suitable for the family.
What if I could share with you a way to get into a more suitable home today?
First Home Buyers Find Lending Too Restrictive
Often first home buyers are restricted in what they “believe” they can buy.
They might feel that they are restricted by:
- The deposit that they have managed to save
- The home loan that they are told they can afford
- The house price cap for the First Home Grants which they believe is the best option
In many cases first home buyers may have been to a bank or mortgage broker to get theri finance pre-approved, only to find that it’s not going to be enough to buy they type of house they need.
Often first home buyers will rely on the First Home Loans by Kainga Ora as it allows they to buy with a lower deposit – from 5% deposit. The problem with the First Home Loans scheme is that the banks apply conditions to the assessment that make affordability harder.
You may even be able to buy a home, but if you could spend a bit more then you could buy something much better. Maybe you can buy a brand new 3-bedroom home instead of a 2-bedroom flat.
Developers Need To Sell New Homes
There are some great opportunities available in the current market where property developers and builders have to sell the homes that they have built.
They have built homes like those pictured in Mt Roskill, Auckland where they probably expected to sell them for over $1million, but in a soft property market they are prepared to sell for a discount. They need to sell these brand new, 3 bedroom, 3 bathroom (3 ensuites) homes with an office room and internal access garage and you might be able to buy one of these for something around $925,000 +/-
It’s still often out of reach for anyone using the First Home Grants(by Kainga Ora) as it’s over the price cap for Auckland, but they are also a lot more house than you might get for $50,000 +/- less.
It may not be out of reach for a first home buyer using the First Home Partners shared home ownership scheme, and in fact it may be easier to buy and more affordable too.
Using Shared Home Ownership To Get Into A Brand New Home
You can borrow less and still buy for more with First Home Partners.
This is how it could work for you:
- Deposit – you need to have a minimum 5% deposit and Kainga Ora can provide shared ownership for up to $200,000 (or max 25%) when you buy a brand new home. On a house purchased for $925,000 (like the one pictured if you can purchase for that price) that would mean that you would need a deposit of $46,250 and this can include your KiwiSaver.
- Home Loan – with a 5% deposit and on a home purchased for $925,000 you could get Kainga Ora to provide up to $200,000 (about 22%) so you then need to borrow $678,750. The banks treat your application as if you have a deposit of $246,250 (27%) and so it’s easier to get approved and you will get the best deals too as you are treated as if you have over 20% deposit.
Because you are able to use a shared ownership for up to $200,000 it means that you have a smaller and more affordable mortgage. The difference could mean that you can buy a home that would suit your family.
Shared ownership is not quite the same as owning the house on your own, and the aim is to buy the house outright within 15-years. While not the same, it is certainly a good way to get into a new home today and even if it takes 15-years to buy the home outright then is that worse than staying renting?
It’s not going to work for everyone, and there may be another option; however you should get the guide that explains about shared home ownership and how the First Home Partners works.
