From the 1st October lending requirements are going to change dramatically in NZ. As mortgage brokers we want to see First Home Buyers get into their first home. Banks will have a capped amount of high level lending. It will still be around but minimal people will get through. So how will the banks decide who is a candidate for lower level deposits.
What the banks will want to see:
CHARACTER – Are you the type of person that a bank wants to lend to? Have you got a good credit rating? Do you pay your bills in time?
CASHFLOW – How much do you earn? How long have you been in your occupation.
COLLATERAL – This refers to how much you are borrowing against a property or other assets. This is the Loan Value Ratio and although lenders have been happy to lend to high LVRs in recent times, the Reserve Bank is now saying “no”. What deposit have you saved.
Banks will have caps on how many high level lending loans that can be put in place.
How can you now get into your first home:
Welcome Home loan
What are the changes to the Welcome Home Loan Scheme from 1 October?
- House price caps have been increased as follows:
- Auckland’s house price cap will be $485,000
- Wellington City and Queenstown Lakes’ house price cap will be $425,000
- Christchurch City’s house price cap will be $400,000
- Selwyn District’s house price cap will be $400,000
- House price cap for Thames/Coromandel, Waimakariri, Hamilton City, Western Bay of Plenty, Hutt City (Lower Hutt), Upper Hutt, Kapiti Coast, Tasman/Nelson, Tauranga City and Porirua City will be $350,000
- For the rest of New Zealand the house price cap will be $300,000.
- Applicants will need to have a deposit that is 10% or more of the purchase price. The existing requirement for a 15% deposit on lending above $200,000 will no longer apply.
- Income caps will be $80,000 for 1 buyer and $120,000 for two or more buyers
- There will be a threefold increase in the funding to support the Welcome Home Loan Scheme.
Parental Equity Loans
- Family equity, family pledge or, more commonly, a limited guarantor loan, allows a family member usually your parents to guarantee a portion of your home loan.
- If you’re a first home buyer saving for a deposit can be difficult. Using the equity in a family members existing property can help you buy a home or invest in residential property sooner – and the best part is they don’t need to actually provide you with any cash.
- Limited liability guarantor: your family member offers their property as security for part of your home loan, usually around 20per cent. Good for reducing extra costs.
- Benefits of family equity loan
- You may be able to buy your home sooner
- Avoid paying Lenders Mortgage Insurance (LMI)
- Maximise the amount you can borrow
- Guarantors can be parents, parents-in-law or step parents (grandparents and siblings will also be considered)
- Guarantors can determine what portion of the loan they will secure
Family Gifts
- If your family is prepared to help but are either unwilling or unable to act as guarantor, then a gift from family is often accepted as the deposit on your first home.
- This has the benefit to your family of limiting the amount of their exposure and can still be a great start to getting you into your first home.
Applying for a first home withdrawal from KiwiSaver
You may be able to use the first home withdrawal from KiwiSaver to help you purchase your first home* if you meet the following conditions:
- You must have been a member of KiwiSaver for a minimum of three years.
- You must have never owned a house or land before.**
- The house or land you are purchasing must be in New Zealand and intended to be your principal place of residence – a rental investment property would not qualify.
- You must not have made a withdrawal from a KiwiSaver scheme for the purchase of a home before.
- *If you have previously owned a property you may also be eligible to withdraw from your KiwiSaver account to help purchase a home, if you can show that you are in a similar financial position to a first home buyer. The eligibility of previous home owners for the ‘second chance’ withdrawal is assessed by Housing New Zealand.
- **If you already hold land and wish to use your KiwiSaver savings to assist with building your first home, you will not qualify for a first home withdrawal
