Introduction

There’s no way around it – buying your first home in today’s market is a lot harder than it once was.

If you’re a first-home buyer out there you might be sick of hearing: “In my day, houses only cost $50,000”.

If only.

According to CoreLogic, the average first home buyer in Auckland spent $900,500 on their property in Q3 of 2021. And affordable houses in NZ’s largest city start from around $750,000.

But first home buyers are still active in the market, making up around 1 in 4 purchases. So while it is harder, young Kiwis are showing that it’s far from impossible.

So, in this article you‘ll learn the Fast Five. These are the 5 sources you can pull your deposit from.

 
KiwiSaver

Fast Five #1 KiwiSaver

First on the list: KiwiSaver. If you’ve had a fulltime job for a while, you’ve probably seen your KiwiSaver balance slowly rise. This often forms the basis of your deposit.

But to be eligible to use it for your first home, you must:

  • Be planning to buy your first ever property
  • Be planning to live in it for at least 6 months
  • Have been contributing to your KiwiSaver for at least 3 years.

That last one often catches people out. One partner might have been in KiwiSaver for 7 years, while the other has only been contributing for 2 years.

In that case you can’t use the KiwiSaver of the person who hasn’t been contributing for as long (just yet).

You would need to wait another year until they’ve been actively contributing to the scheme for 3 years.

One other fish hook that catches people out: you need to leave $1,000 in your account when you withdraw. So if you have $26k in your KiwiSaver account, you can only take out $25k.

The only downside to KiwiSaver? You only get one shot at using it (most of the time). If you’ve been a home owner before, or your name has been on the title of a property, it’s likely you won’t be able to access it for another property except in rare circumstances. See what those rare chances are below.

So, make the most of it.

When can I use my KiwiSaver twice?

Some people can apply as a ‘second-chancer’. If you are approved, you can then access the money in your KiwiSaver account for the purchase of another property.

To be approved you need to be in the same position as a first home buyer would be. For instance, you can’t own your own home or any other property. For example, this could happen if there was a relationship breakdown or divorce.

How much of my KiwiSaver can I use?

You can use your entire balance, minus $1,000. So if you have $26k in your KiwiSaver, you can only access $25k.

How do I find out how much I have in my KiwiSaver?

You can find this out if you log into your account through your KiwiSaver provider. For many people, this may be their own bank.

How do I find out who my KiwiSaver provider is?

If you don’t know who your KiwiSaver provider is you can find out by logging into your myIR account (i.e. your IRD online account). Look under the KiwiSaver section.

Government assistance

Fast Five #2 Government assistance

There are several government programmes that can assist when buying your first home. You’ve got the First Home Grant, the First Home Partner, and then the First Home Loan.

First Home Grant

It’s not often you’ll get a cool $10,000 from the government … for free.

But, under the First Home Grant, first home buyers can get up to $10,000 (each) from the government for their deposit.

Because it applies to both purchasers it means if you are buying a property as a couple you could have an additional $20,000 to put towards the deposit.

But as great as a free $10,000 gift is, terms and conditions do apply. And some of these are getting hard to meet these days.

The toughest condition in today’s market is the house price cap. To be eligible you need to buy a house for under $700,000 (if buying a New Build).

But if you’re buying an existing property, the maximum price you can pay is $625,000. And anyone in Auckland will know that finding a house for under that figure is very hard to come by.

In addition, to be eligible you must:

  • Plan to live in the property you buy for at least 6 months
  • Have contributed 3% of your income to your KiwiSaver for at least 3 years
  • Earn under $95,000 (for a single person) or $150,000 (for a couple).

Do my KiwiSaver contributions need to be continuous for 3 years?

No, you can still be eligible as long as you have contributed to KiwiSaver for at least 3 years in total.

For instance, if you worked in NZ and contributed to KiwiSaver for 2 years, then went overseas on an OE, and returned to work for another 2 years, you would still be eligible.

How much can I get from the government?

If you are eligible for the programme you can get $1,000 for each year you have contributed to KiwiSaver.

So if you have been in KiwiSaver for 4 years, you can get $4,000. But there are some important things to know:

  • If you buy a New Build, it doubles. So if you have been in KiwiSaver for 4 years, then that means getting $8,000 if you are eligible
  • There is a minimum of 3 years and a maximum of 5 years. So if you have been in KiwiSaver for 2 years, you get nothing. If you have been in for 6 years, you get $5,000 for an existing property or $10,000 for a New Build.

Can I use the First Home Grant if I’ve already owned a property before?

Yes, but there are some strict rules about who can and can’t access this. See Kainga Ora for who this applies to.

First Home Partner Programme

The First Home Partner is a shared-ownership scheme between you as a first home buyer and Kainga Ora (the government).

Put simply, if you don’t have the full deposit to buy a house you can share with the government. That means the government owns part of your house.

You then buy them out later on down the line.

 

You can potentially get a surprisingly large amount of money through this programme.

The maximum contribution Kāinga Ora will make towards a home purchase is 25% or $200,000 – whichever is lower.

But the actual amount they’ll give you for your deposit depends on how much deposit you have and what the bank will lend you.

For instance, let’s say you have a 10% deposit and you secured a mortgage for 75% of the home. Kāinga Ora will make up the 15% difference, as a shared owner.

The good news about this programme is that the eligibility criteria is different from the others. While there is still criteria to access it, there is no house price cap. That means you could buy a $1 million house and still potentially access the programme.

First Home Partner is a brand new scheme, and those in the business reckon it’s an idea that has a lot of merit. Because even if you buy them out in 3 years, you’ve had the benefit of living in your own home having only paid a smaller deposit.

Who is eligible for the First Home Partner?

To be eligible for the First Home Partner programme, you must:

  • Commit to living in the home for a minimum of 3 years from your settlement date
  • Have a minimum 5% deposit of the purchase price
  • Have a combined household income of less than $130,000. That means a single person earning $125,000 could still access government support
  • Be a first home buyer.

How do I buy the government out?

If the government gives you $100,000 for the property you may need to pay them back more than $100,000. That’s because you need to buy back their share of the property at the property’s current value at the time you pay the money.

Here’s an example. Let’s say they give you $100,000 for a 10% share of a $1 million property. If the property increases in value and is now worth $1.1 million, you need to pay them $110,000. That’s because their share is now worth more.

How do I get the money to buy the government out?

One option is to save money and pay the government back. But a more common way is that as the property increases in value, you can borrow against it. So if the market appreciates you may be able to take out a larger mortgage.

In some instances you can then use this money to pay the government back. Your mortgage broker can show you how this would work for your personal situation.

How long do I have to buy the government out?

You have up to 15 years to buy out the government’s share. And every year you’ll work with your Kainga Ora relationship manager on a Goals Management Programme.

This is where they help you to put a plan in place to buy them out.

 

First Home Loan

If you have as little as a 5% deposit, you may be able to apply for a First Home Loan through Kainga Ora.

This is slightly different from the other types of government support mentioned. That’s because rather than giving you money for your deposit, the First Home Loan can let you buy a property with a lower deposit.

If you have less than a 20% deposit the government will give the bank additional assurance to help cover their risk.

For instance, if you qualify for a First Home Loan:

  • Your loan won’t count as part of the bank’s LVR restrictions – part of the Reserve Bank’s regulations. This means they are more likely to lend to you with a lower deposit
  • The government will pay your Lenders Mortgage Insurance (LMI) on your behalf. This is usually 1% of the loan. So this saves you money too.

The maximum income you can earn to access these government-backed loans is $95,000 (for a single person) or $150,000 (for a couple).

However, there is a “house price cap”, which means you are only eligible as long as your property is under this price.

The cap is different per region. Head to the Kainga Ora website to check out what the cap is for your region.

Bank of Mum And Dad

Fast Five #3 Bank of Mum And Dad

Many people think the Bank of Mum and Dad is about asking your parents for a whole heap of cash.

That can be the case, but doesn’t often happen. Because most parents aren’t in a position to just lend you a whole bunch of cash.

But parents can still help out their kids by using the equity they have in their own home.

That’s because if your parents bought their house 10-20 years ago they are likely to have accumulated equity. In other words, the house will have gone up in value and they will have paid off some of their mortgage.

For instance, let’s say your parent’s house is worth $800K and they have a $200,000 mortgage. This means the equity in that house is $600K (the housing market has been very kind to Baby Boomers and Gen X’s).

Your parents (or whoever is helping you) can take out a loan against their property and use it as the deposit for your first home.

Now there are some ways this should be set up. For instance, you as the first home buyer should be on the mortgage application with your parents, and there should be an agreement about how you’ll pay the money back.

But this is a great way for first home buyers (especially in Auckland) to get the extra deposit they need for their first property.

For example, let’s say a couple is purchasing their first home together, but one person has a larger deposit than the other. The Bank of Mum and Dad can be used to balance out the two deposits.

By this we mean, if person A has $50,000 to go towards the deposit and person B only has $20,000 – person B can use the Bank of Mum and Dad to get the $30K to match person A.

 
Sale Of Assets

Fast Five #4 Sale Of Assets

As odd as it may be to suggest selling your car to buy a house, the sale of assets can be an option for some first home buyers.

Hear us out.

Let’s say you are a couple and you both own cars, but you’re planning on buying a New Build house that only has 1 car park. If you sell one (even for just a short time) you could be adding $10,000 to your deposit.

Now, $10,000 (if you are using a 20% deposit) can mean buying an extra $50,000 worth of house. So selling a $10k car to get an extra $50k of house could be something to consider.

It’s also important to remember it is easier to get a car loan than a mortgage. So, if you sell your car for a short time to secure your mortgage, you can always buy another one on finance once you have your ducks in a row.

It’s not the right fit for everyone, but is a legitimate way some people will get a start in property if they are struggling to pull their deposit together.

Savings

Fast Five #5 Savings

Finally, there’s the one you probably thought of from the start. Savings. It’s simple. It’s obvious. But, it works.

So if you are short on your deposit you can use the first 4 deposit sources to increase the bulk of your deposit. You can then use savings to cover the balance.

To find the extra money you may need to get creative. For example, If you can move into a flatting situation with friends and/or family in the few years before looking to buy a house, this might be a great way to ramp up your savings in a short amount of time.

Deposit Amount

How Much Deposit Do I Need As A First Home Buyer?

In an ideal world a first home buyer will have a 20% deposit. But this is not always going to be the case.

For instance, let’s say a first home buyer is looking at a small 2-bed unit in Auckland for $750,000. The deposit on that is $150,000.

But, it is possible to get a mortgage with a smaller deposit, like 10%.

Up until December up to 45% of first home buyers were buying properties with less than a 20% deposit.

This has decreased since January. Now about 1 in 5 first home buyers are being approved with less than a 20% deposit. Even though these types of low-deposit loans aren’t as popular as they were 6 months ago, it’s still possible to secure a mortgage with one.

Just be aware that these low-deposit loans are decided on a case-by-case basis by the banks, so they aren’t available for everyone.

For a more detailed look at how much deposit you need for a first home buyer, head to our article.

Conclusion

You Don’t Need To Use All Of These Fast Five

Now you might look at these and say “I can’t use the bank of mum and dad” or “I earn more than the First Home Grant cap … that’s not for me.”

That’s cool. You don’t have to use every single one of The Fast Five. But you do have to use one or two of them.

You can’t say: “I can’t use KiwiSaver and I can’t access government support, and the bank of mum and dad isn’t for me, and I can’t sell any assets, and I don’t have any savings.”

In that case you don’t have a deposit and you won’t be able to buy your first home.

So you don’t have to do everything, but you do need to do something.

Your first home should work more on paper than it does emotionally. The better the bargain the better the purchase.

Sammy First Home 001

Samantha Cairns-Morrison

Samantha Cairns-Morrison is a property investor and the Director of Opes First Home – a service for first-home buyers looking to get onto the property ladder. She regularly appears on the Property Academy Podcast and has extensive property development sales, commercial real estate and property coaching experience.