New rules for first home owner support

In Budget 2022, the government eased some of the criteria for the First Home Grant, First Home Loan and Kāinga Whenua schemes administered by Kāinga Ora. The changes were made to help more first home buyers (existing or new-build) by better reflecting market prices for homes in some areas, as well as the needs of single income households with dependants.

There’s no doubt the changes were good news for some first home owners. Whether they make it possible for you to get into home ownership will depend on your particular circumstances. So, to help you get started, this article briefly re-visits each of the Kāinga Ora first home owner schemes and highlights the changes made in Budget 2022.

New eligibility rules for a First Home Grant

If you’ve been paying into KiwiSaver for three years or more, you might be eligible for a First Home Grant to add to your deposit. Your total deposit, including any money from a First Home Grant or KiwiSaver first-home withdrawal, just has to be at least 5% of the purchase price. If you’re buying or building a home with someone else, you can both apply for a First Home Grant.
How much does a First Home Grant offer?

If you’re buying an existing home, the grant offers $1,000 for each year you’ve contributed to KiwiSaver up to a maximum of $5,000. So that means $3,000, $4,000 or $5,000.

If you’re buying a new-build home or land the amounts double, which means $6,000 to $10,000 depending on how many years you’ve been contributing to KiwiSaver.

What were the new rules for Home Loan Grants in Budget 2022?

Price caps
A price cap is the maximum house price you can use a First Home Grant for. Price caps are reviewed every six months to reflect changes in market prices in each area. For example, here are the price caps for some main regions, as published on 15 May 2023.

RegionExisting homes price capNew-build homes price cap
Auckland$875,000 $875,000
Hamilton urban area$650,000 $775,000
Tauranga urban area$800,000 $875,000
Wellington urban area$750,000 $925,000
Christchurch urban area$575,000 $775,000
Dunedin City$500,000 $675,000

KiwiSaver contribution
The minimum annual KiwiSaver contribution rule for the grant was changed from 3% of your income to 3% or $1,000, whichever is less.

Income caps
The maximum annual income allowed is still $95,000 for an individual buyer and $150,000 combined for two or more buyers. However, individual buyers with dependants can now have an income of up to $150,000.

Additional home types that qualify as new-builds
Previously, if you were relocating an existing home onto a new section it could only qualify as an existing home, which means lower price caps. But now, if it’s a newly built home with a code compliance certificate issued in the last 12 months, it can qualify as a new-build home and the associated higher price caps.

If you belong to an eligible Progressive Home Ownership rent-to-buy scheme, the grant amount for new-builds now applies.

New eligibility rules for a First Home Loan

Kāinga Ora First Home Loans require a deposit of only 5%. They’re provided by participating banks and other lenders, but underwritten by Kāinga Ora. That reduces the lender’s risk when offering a low 5% deposit loan, so they can reduce their usual lending requirements.

Most of the other criteria are set by the participating lender, and they’ll usually take into account any other debts you have and how you’ve managed money in the past. You’ll also have to pay a lenders’ mortgage insurance annual premium, which on 1 June 2023 was set at 0.5% of the amount you borrow (it used to be 1%). The cost of this and other set-up fees can often be added to your home loan.

First Home Loans are only for a home you’ll live in, not an investment property. It has to be your first home or you have to be in a similar financial position as a typical first home buyer. You have to be a New Zealand citizen, permanent resident or resident visa holder who’s normally resident in New Zealand.

What were the new rules for First Home Loans in Budget 2022?

Price caps
There used to be house price limits or price caps for different regions, like there are for a First Home Grant. These were removed completely, so the borrowing limit is now based on the home loan repayments you can afford, just like any other mortgage. The lender has to act responsibly and make sure you can reasonably afford the repayments, now and into the future, even if interest rates rise.

Income caps
These are the same as the income caps for a Home Loan Grant:

  • $95,000 for an individual buyer
  • $150,000 combined for two or more buyers
  • And a new category of $150,000 for individual buyers with dependants

New eligibility rules for the Kāinga Whenua Loan Scheme

This scheme is designed to help Māori own a home to live in on whenua Māori (Māori land) that has multiple owners and can’t be mortgaged.

Kāinga Whenua loans overcome the difficulty of getting a mortgage for a home on land that’s in shared ownership. The loans use only the house as security, not the house and land like most mortgages.

The loans are provided by Kiwibank, while Kāinga Ora provides the lenders’ mortgage insurance. Kiwibank’s normal lending criteria apply and there are Kāinga Whenua eligibility criteria as well.

Kāinga Whenua loans are available to eligible individuals and Māori land trusts, provided they have no other way to finance the home. They can be used to build, relocate or purchase an existing home on whenua Māori land, provided the home meets certain criteria. They can also be used to repair or maintain existing homes on whenua Māori.

What were the new rules for Kāinga Whenua loans in Budget 2022?

Loan cap

  • The maximum amount you can borrow with a Kāinga Whenua loan is now $500,000. It used to be $200,000, which provided much less choice and opportunity.
  • A deposit of 15% is now required on every dollar borrowed over $200,000.
To learn more

IMPORTANT: 29/09/2023 – Due to recent unprecedented demand, the Kāinga Ora First Home Partner scheme is now fully subscribed and therefore they will not be accepting any new applications while they work through their commitments to those already in the scheme. Find out more here.

DISCLAIMER: The information contained in this article is general in nature. While facts have been checked, the article does not constitute a financial advice service. The article is only intended to provide education about the New Zealand mortgages and home loans sector. Nothing in this article constitutes a recommendation that any strategy, loan type or mortgage-related service is suitable for any specific person. We cannot assess anything about your personal circumstances, your finances, or your goals and objectives, all of which are unique to you. Before making financial decisions, we highly recommend you seek professional advice from someone who is authorised to provide financial advice.

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