Navigating the world of home loans can be confusing, especially for first home buyers. Below, we clear up some things about home loans so you can get a good understanding of what’s on offer and what might be right for you.
Types of Home Loans
Features of a home loan tend to vary depending on the lender, but there are typically three types of home loans that each has their benefits and downsides.
- Basic – These offer low fees and a simple structure but have fewer features and less flexibility.
- Standard – These loans offer flexibility with features such as choosing between fixed, variable and split rates, offset accounts and redraw facilities. The trade off is that they tend to have higher interest rates than basic loans.
- Packages – This involves bundling your home loan with other financial products from the lender such as a savings account and a credit card, which allows you to access a discounted interest rate.
Ensure you carefully examine the fees of each home loan product you look at. Don’t make the mistake of focusing entirely on interest rates only to find yourself paying big monthly fees, application fees, break costs, valuation fees and other costs.
Your Buying Capacity
The amount you can borrow will vary from lender to lender. Lenders assess your buying capacity by looking at a number of factors relating to your financial condition, including:
- Current assets
- Living expenses
- Credit history
- Current debts and other financial commitments
- How much of a deposit you can make
Oftentimes, having enough for the initial deposit is the biggest hurdle for first home buyers. But there are a variety of programs and loan options, which may be able to help.
First Home Loan
While you can apply for any type of home loan if you meet lending criteria, as a first home buyer you may be eligible for a First Home Loan. While most lenders require you to have a deposit of at least 20%, a First Home loan only requires a deposit of 10%. First Home Loans are only available to people who meet specific eligibility criteria:
- You must be a New Zealand citizen or permanent resident and ResidenceVisa (but conditions applies)
- You must not already own any property
- You must be planning to live in the house you are buying
- If you to want to avail government home grant Your income for the 12 months before you apply must be less than $85,000 for individuals or less than $130,00 combined if you are buying the property with other people. Otherwise, there is no limit in buying your first home house value
There also are restrictions on the value of the property you can buy, depending on the region you live in and whether you are buying an old or a new property. For example, the cap for older properties in Auckland is $600,000 and $650,000 for new properties. Keep in mind that you’ll still have to meet other lending criteria.
Withdrawing From Your KiwiSaver
If you’ve been a member of KiwiSaver for at least three years, you may be able to withdraw money from your super account to use as a deposit on your first home. If you’re eligible, you can withdraw any contributions you have made as well as interest and tax credits, as long as you leave a minimum balance of $1000 in your KiwiSaver account.
KiwiSaver HomeStart Grant
If you’ve been a member of KiwiSaver for at least three years and have contributed to your account consistently during that time, you may also qualify for a KiwiSaver HomeStart grant of up to $10,000 (depending on how long you’ve been contributing and whether you’re buying a new or older home).
- To qualify for a HomeStart grant you’ll need to meet the same eligibility criteria as for a First Home Loan:
- You must be planning to live in the home
- You must not own any other property
- The property price must be less than the value cap for your region
- Your annual income must be less than $85,000 per year (or $130,000 combined income if you are buying the property with other people)
If you’re buying a property with other people and you each qualify for a HomeStart grant you can combine these grants and use them all towards your deposit.
Contact Mortgage Masters – Independent Brokers in Auckland
Mortgage Masters are your independent mortgage brokers in Auckland, servicing the community in home loans since 1998 to find our clients the best deal on the market. If you need tailored financial advice or help finding the right home loan for your needs, please get in touch with our team today.