The most popular question that is asked is “how do we buy our first home?”, “Is it possible to buy in this current market?” House prices are not the same as it was 10 years ago, it’s so much more expensive!
Keep reading! There is a way to get into a more suitable home today…
Is Lending Too Restrictive for First Home Buyers?
Often first home buyers feel that they are restricted in what they “believe” they can buy.
Restrictions may include the following:
- 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
Most first home buyers have applied through a bank or through a mortgage adviser for a pre-approval, only to find out that the pre-approved amount is not going to be enough to buy the house they need. First home buyers often rely on the First Home Loans by Kainga Ora, this allows them to purchase with a 5% deposit. The issue with the FHL scheme is that the banks apply conditions to the assessment that make affordability harder. Even though you may be able to purchase a home that way, but if you think about it, spending a bit more you could purchase a better home or even a brand new 3 bedroom house instead of a 2 bedroom flat.
New Homes Built By Builders & Developers Need to Sell
There are some great opportunities available in the current market where property developers and builders have to sell the homes that they have built.
The picture below is an example of the properties they have built here in Auckland, they probably expected to sell these properties for over $1million, but in a soft property market they are prepared to sell for a discount. So looking at a brand new 3 bedroom, 3 bathroom (3 ensuites) home with an office and internal access garage, you might be able to purchase one of these around $925,000 +/-. Anyone using the First Home Grants (by Kainga Ora) is often out of reach as it’s over the price cap for Auckland. 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.
Shared Home Ownership
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.
You can borrow less and still buy for more with First Home Partners.
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 may not work for everyone and there may be other options, however you should get the guide that explains about shared home ownership and how the First Home Partners works.
