Category Archives: New Builds / Construction Loans

First Home Grant

Can I get the First Home Loan or the First Home Grant? What you need to know

We’re all aware that there are more challenges than ever for first home buyers. So it’s important to know what support is out there and whether you are eligible when you start your first home journey. Two key options available are the First Home Loan and the First Home Grant.

What is the First Home Loan?

The First Home Loan is a scheme where the government underwrites mortgages. This means the government is carrying the risk of the mortgage instead of the bank and allows people with as little as 5% deposit to be approved for a loan.

What are the eligibility criteria to get the First Home Loan?

At the time of writing, to be eligible for a First Home Loan, you must:

  • Have a deposit of at least 5%.
  • Meet the income limits for the last 12 months. This is currently $95,000 or less before tax for a single buyer and $150,000 or less total before tax for 2 or more buyers, or for a single buyer with dependents.
  • Be a first home buyer or be in an equivalent financial position. This means no ownership in any other property (this doesn’t include ownership of Māori land).
  • Be buying a home you will live in. You cannot get the First Home Loan for an investment property.
  • Meet participating lenders’ eligibility criteria (income, debts, credit history). We can help you navigate this.
  • Pay a Lender’s Mortgage Insurance (LMI) premium of 1% of the loan amount.
Home approved thanks to First Home Grant

What is the First Home Grant?

The First Home Grant is a New Zealand Government grant, administered by Kāinga Ora – Homes and Communities. The grant is a cash contribution towards your deposit. Although it’s called the First Home Grant, people who once owned a house but no longer own property can still be eligible.

If you meet the eligibility criteria and are buying an existing home you get $1,000 for each year you’ve been in KiwiSaver, up to a maximum of $5,000.

The amount doubles if you buy a new home or land to build on, so you get $2,000 for each year you’ve been in KiwiSaver, up to a maximum of $10,000.

The grant is per person, so if you buy a house with a partner and your combined income is under the 2 buyer income cap, together you could receive up to $20,000!

What are the eligibility criteria to get the First Home Grant?

At the time of writing, to be eligible for a First Home Grant, you must:

  • Have contributed at least the minimum amount to KiwiSaver (or complying fund or exempt employer scheme) for 3 years or more. See KiwiSaver contribution requirements section for more details.
  • Meet the income limits for the last 12 months. This is currently $95,000 or less before tax for a single buyer and $150,000 or less total before tax for 2 or more buyers, or for a single buyer with dependents.
  • Meet the deposit requirements.
  • Not own any property (this doesn’t include ownership of Māori land).
  • Purchase a property that meets requirements, including your region’s house price cap. Check the property criteria here.
  • Agree you will live in your new house for at least 6 months from the settlement date, or for a new build, from the date the code compliance certificate is issued.
  • If buying a property with other people, be buying an equal share.
  • Provide proof of deposit, income and KiwiSaver contributions.
  • Be over 18.

Previous home owners in New Zealand or overseas may still get the First Home Grant. To be eligible, as well as meeting the standard criteria above, you must:

  • Have not previously received the First Home Grant or its predecessors, the KiwiSaver HomeStart grant or KiwiSaver deposit subsidy.
  • Have total realisable assets worth less than 20% of the house price cap for existing properties for the area you are buying in.
Savings from First Home Grant

How does the First Home Grant Work?

You apply for the First Home Grant on the Kāinga Ora website page. As part of the application process you will need to provide proof of deposit, income and KiwiSaver contributions.

You can apply for pre-approval before you look for a house. This is the recommended way, as it gives you certainty that you will receive the money when you find the right property. It also removes the time pressure when pulling together the documentation to support your application.

If you’ve already got a signed sale and purchase agreement, you can apply for a full grant approval as long as you apply at least 4 weeks before settlement day.

Next Steps

We can help you with your First Home Loan and First Home Grant applications as part of managing the mortgage process for you. Get in touch today for a no obligation chat.

New building built _ Turn-Key or Progress Payment

The Difference Between Turn-Key and Progress Payment

Turn-key and progress payment contracts are the two different types of construction contracts available when you build a new home. In most cases, the building company will only offer one or the other, not both.

What are turn-key and progress payment contracts?

Why have we chosen this topic? New builds are becoming very popular lately. The government is very keen to encourage the creation of new homes. So they’ve created some good incentives to get people building.

The big incentive is the ability to get a loan for a new build with as little as 10% deposit. This is a huge drawcard, especially for first home buyers. The national average for house prices went up by nearly 30% in 2021. With house prices so high, saving for a 20% deposit for your first home is a big challenge for most. Being able to get a new build property with a smaller deposit allows many first home buyers a chance to get a home much sooner than they otherwise would.

The government is also keen to encourage property investors to buy new builds rather than existing homes. In addition to lower deposit requirements, new builds are exempt from some investment property taxes.

What is a turn-key contract?

With a turn-key construction contract, you pay a deposit of 10% or so upfront. The balance is due once the build is completed.

Turn-key contracts are attractive to buyers as they’re nice and simple. You don’t have to go to the bank to draw down payments throughout the build, and therefore don’t have to pay interest until the build is completed and has been paid for in full.

Turn-Key and Progress Payment
Drawing / Visualising a new home with Turn-Key or Progress Payment

What to be aware of with turn-key contracts

Turn-key contracts are generally a bit more expensive than progress payment contracts. This is to compensate the developer for taking on the financial burden of all costs during the build.

To get a turn-key contract you need an offer of finance from a lender. The offer is usually valid for a maximum of 1 year. Construction can take longer than this, in which case you would need to reapply for finance. There is a risk that at that time you no longer meet the current finance criteria for a renewed offer of finance. Using a broker minimises the risk of finance falling through as they can help you put your best application forward and then look into other lender options if needed.

When paying your deposit for a turn-key contract, make sure that the money is going to be held in a trust. This is to protect your money in case the developer goes bankrupt during the build.

Some developers require final payment on ‘practical completion’ rather than on the code compliance certificate (CCC) being issued. This is because they have completed all the work and it can take a couple of months for a CCC to be received, a long time for a developer to wait for payment. Some banks are wary of this as it creates a slight risk for the owner and therefore the bank, however some lenders are fine about it. Tell your mortgage broker early on if your contract has this requirement.

What is a progress payment construction contract?

Just as the name suggests, progress payment contracts require progress payments on completion of each stage of the build (e.g on completion of foundations).

To fund the build, you get mortgage approval upfront, with your deposit paid as part of the first instalment. You then draw down the funds as each payment becomes due. This is done by sending the invoice to the bank, who then pay the developer. You pay interest on any funds that have been released rather than on the full mortgage amount. Unlike turn-key contracts your finance won’t expire after a year as you are actively borrowing money during the build.

New Kitchen - Turn Key or Progress Payment
Beautiful New Kitchen layout

What to be aware of with progress payment contracts

While progress contracts are slightly cheaper than turn-key, you will be paying interest on building costs during the build so any savings may be negated the long run.

As you will be paying interest during the build but not yet being able to live there or rent it out to cover costs, you need to ensure you have budgeted for interest payments during the build. Keep in mind builds often take much longer than planned.

Do lenders prefer turn-key or progress payments?

In general, lenders prefer progress payment contracts as they provide security early on in the contract. But as with anything, it differs lender to lender, with policies changing all the time.

Working with a mortgage broker is key, as they will look across the lenders to find one whose policies suit both your financial situation and the terms of your building contract. If you’re looking for finance for a new build, or for any type of mortgage, get in touch! We’d love to help.