Crack Down On Lending
On the 2nd of December 2021, it is about to become much harder for first-home buyers to qualify for a home loan due to the incoming changes to the Credit Contracts Consumer Finance Act. Essentially, if you submit a home loan application, then you need to prepare for your living expenses and spending habits to be heavily scrutinised by lenders as they will trawl through your bank accounts to determine whether a loan is affordable and suitable for you.
If you are a first home buyer, the incoming crack down on lending makes getting on the property ladder that much harder not to mention the existing difficulties faced by the housing crisis, having sufficient deposit funds and general availability of loans. However, with Kāinga Ora’s new initiative the necessary “First Home Partner Scheme” there is still a glimmer of hope for all those out there struggling to get on the property ladder.
First Home Grant
You may have already heard of Kāinga Ora’s First Home Grant which is an initiative aimed at assisting first home buyers with a grant of up to $5000.00 towards the purchase of an existing home or up to $10,000.00 for a new build. To be eligible for a grant, there are several requirements that must be met such as:
i. Income criteria;
ii. Property price caps; and
iii. Length of contributions to KiwiSaver.
First Home Partner
Despite a broadening to the abovementioned First Home Grant criteria in April 2021 to make the grant available to more purchasers, meeting the criteria is still particularly difficult and it is not very often that we as lawyers come across clients who are eligible. This provided the need for another initiative in assisting first home buyers which has led to the First Home Partner Scheme
being offered.
The First Home Partner Scheme aids first home buyers in buying a property where their deposit and home loan are not sufficient to fund their purchase. Essentially, it is a shared ownership scheme where first home buyers purchase a property together with Kāinga Ora.
What Is Shared Ownership? Shared ownership does not differ too much from full home ownership, it essentially means that Kāinga Ora will purchase the home with you. So Kāinga Ora, will be registered on the Record of title alongside you but it does not mean that Kāinga Ora can use or occupy the property.
How much interest Kāinga Ora owns will differ depending on each purchaser’s situation for example if you have a 5% deposit available, and you have pre-approved finance for the bank to lend you 75% of the value of the property in this situation Kāinga Ora’s will contribute 20% to purchase the home with you in return for a 20% share in the property.
The maximum contribution that Kāinga Ora will contribute is the lower of 25% of the value of the property or $200,000.00. However, to be eligible you still must meet the lending requirements of the bank to receive a home loan and have a minimum deposit of 5% of the purchase price.
So What’s The Catch?
If you are eligible to be a First Home Partner you must:
- Sign a Shared Ownership Agreement with Kāinga Ora.
- Live in the property as your primary place of residence for at least 3 years post settlement.
- Meet annually with a Kāinga Ora Relationship Manager to review your financial circumstances.
- Purchase Kāinga Ora’s share within the first 25 years post settlement.
- Seek permission from Kāinga Ora in relation to any home improvements or renovations or if you want to sell your home.
For further information or help with applying for the First Home Partner Scheme please do not hesitate to contact us today.
