October Column
Will your children be able to follow in your property investor footsteps? Are they enrolled in KiwiSaver?
Both KiwiSaver and the HomeStart grant are fantastic tools for first home buyers to help get them onto the property ladder.
A young couple, approaching their 30s, recently came to us to arrange finance to purchase their first home. Having been in KiwiSaver since its inception, they had saved almost $100,000 in their accounts which they could use as a deposit for their first home. Unfortunately, in this case, they did not qualify for the HomeStart grant, which would have given them a potential extra $40,000 to add to their deposit.
KiwiSaver enables first home buyers to withdraw the balance of their accounts to purchase a property as long as they have been a member for at least three years and provided they leave a minimum balance of $1,000 in the account. The HomeStart grant available to first home buyers varies depending on whether the property is an existing dwelling or a new build, and also how long contributions have been made. Additionally, there are caps on the purchase price, which vary per region.
Here is an example to show you how this could work with a new build property:
Mr & Mrs Smith are your typical New Zealand first home buyers with a joint income of $120,000. They want to purchase a property in Christchurch for around $550,000 and they each have $21,000 saved in KiwiSaver.
Mr & Mrs Smith are eligible for the full HomeStart grant, which will give them an additional $10,000 each. This brings their total deposit to $60,000.
With a new build, Mr & Mrs Smith could borrow over the 80% limit under the LVR exemption. The 10% deposit for a new build with a purchase price of $550,000 would be $55,000. Therefore, Mr & Mrs Smith have $5,000 more than the minimum required.
Second Chance Buyers
Previous home owners may still be eligible for both a KiwiSaver HomeStart grant and a first home withdrawal, providing they have not already been received for a previous home purchase and meet the eligibility criteria. (This can be found on the Housing New Zealand website).
As you can see, the dream of your children starting their own property portfolios may not be as unattainable as first thought. We can help with answering the tricky questions about borrowing money for a first home. We’ll get an idea of their finances and the house they want. We can give them an overview of what they will be able to borrow and start them off on their property investment journey.
We look forward to seeing many of you at this year’s New Zealand Property Investors Federation conference in Dunedin, where several members of my team and I will be attending. We will be available to discuss any questions you may have around the financing and insurance aspects of your properties, both existing and future purchases. Our team comes from a variety of financial and banking backgrounds and our advisers share an immense wealth of knowledge about lending, borrowing and buying properties. Many of the team are experienced property investors themselves. You are in safe hands here at Tony Mounce Mortgages & Insurance.