Compare First Home Buyers Home Loans

Helpful information for first home buyers

First home buyers, historically, have always been up against it. In New Zealand, insufficient housing supply, specifically in Auckland, is increasing real estate prices, which is having a flow-on effect in other parts of the country. In fact, according to Quotable Value Figures released in July 2016, house prices shot up 5.6% in the previous three months. This is the fastest increase in the last 12 months. In Auckland alone, house values increased 4.7% in the three months to July 2016, and 16.1% since June 2015, reaching a new average of $975,087.

In turn, rent prices are increasing, making it even more difficult to save up a decent deposit for your dream home. Add to this the Reserve Bank of New Zealand increasing minimum deposit requirements for home loans and it all poses quite a challenge for Kiwi first home buyers.

CANSTAR recognises there is an even greater challenge for home buyers going through the mortgage rigmarole for the first time, and so has compared 39 home loans for first home buyers from 9 institutions.

Banks, credit unions, building societies and mortgage specialists have a range of options for first home buyers. And, given the way property is booming in this country, it pays to compare home loan for first home buyers, to ensure you get the best value you can.

CANSTAR takes into account important factors for first home buyers when they select a home loan, such as whether the institution offered educational resources on home loans, availability of Kiwisaver, and any available tools including home loan calculators.

Educating first home buyers about how they should be preparing themselves, setting savings goals and offering savings vehicles that provide incentive towards the end goal of home ownership is paramount.

First home loan features to look for

Providers of first home buyer loans should be arming their clients with full checklists, as well as home loan calculators, so home buyers can estimate the full cost of the loan and the entire home-buying experience. When the time comes to borrow, the lender has to guide the first home buyer through the maze that is buying a home.

Some loan features you may want to consider include:

  • Additional Repayments
  • Redraw/Transactional Home Loan
  • Offset Facility
  • Split Facility
  • Top-up Facility
  • Loan portability

Other tips for first home buyers

Buying a property – especially first time around – is a big decision. Here are some pre-purchase tips:

Don’t start looking until you have a location

There are thousands of places to buy out there and the possible choices can become overwhelming. Narrow your search to a specific location before you start looking. Choose either one suburb, or one suburb and anything within a five kilometer radius of that area. Having a focus will save you precious time.

Suss out the market

Falling “in love” with a property on the very first weekend you start looking can give you a bad case of buyer’s remorse down the track. So once you’ve chosen your location, put yourself in a good negotiating position by getting to know the value of the suburb you’re considering.

Get home loan pre-approval

It’s vital to know what your buying budget is. There is no point looking at places that cost far more than the bank will lend you. Try our borrowing power calculator, and talk to your financial institution or a mortgage broker about getting a pre-approval in place. Also work out your upfront costs, such as lenders mortgage insurance, stamp duty and moving costs.

Check your credit rating

Knowing what’s on your credit rating can help you to explain any transgressions to your prospective lender.

Here are some resources to help you check your credit rating:

Compare home loans

Your home loan may be the biggest debt you ever have so ensure you are not paying more than you need to. Compare current minimum, maximum and average home loan rates for home loans on CANSTAR’s database.

Finally, once you have found the home of your dreams, make sure that any documentation you sign is conditional on at least a property and pest inspection as well as finance.

KiwiSaver is the retirement savings scheme in New Zealand. It was introduced by government initiative in July 2007.

In the KiwiSaver Scheme, members build up their savings through regular contributions from their before-tax pay, from their employer, and from the government. It is voluntary to join.

It does not replace New Zealand Superannuation (NZ Super), so you can receive super payments and have a KiwiSaver fund at the same time. NZ Super is the government’s pension scheme available to most New Zealand residents over 65 years old, regardless of how much they earn or how many investments they have.

KiwiSaver can also come in handy before you retire. You can access these savings when you buy your first home, if you have been contributing for three years or more.

CANSTAR has put in the hard yards here too, to compare KiwiSaver providers to help give you some guidance, including for first home buyers.

You can read about the basics of the KiwiSaver’s HomeStart grants and first home withdrawal rules here. But be prepared. There are a number of tricks to navigate to avoid a nasty surprise at the last moment.

If you were extremely forward thinking, you may have saved all your pennies since the age of 12 to put towards a house deposit. But, for the rest of us, financial assistance on top of any home loan will be a very appealing option for first home buyers. Fortunately, there are a range of first home buyer grants available from the Government and various institutions. However, there are, as you would expect, some limitations in terms of who is eligible. Read more about these requirements in CANSTAR’s coverage of first home buyer grants.

Grants available to first home buyers include:

KiwiSaver HomeStart Grant

After 3 years of making contributions to KiwiSaver, you may be eligible to apply for aKiwiSaver HomeStart Grant of $3,000 to $5,000 for individuals and up to $10,000 for couples. The grant can effectively be doubled if you are building or purchasing a new home, or purchasing land on which to build a new home, so that the grant may be up to $10,000 for individuals and up to $20,000 for couples.

To be eligible to apply for this grant, you need to make sure that you’ll still have at least $1,000 in your KiwiSaver account after the grant, and you need to plan to live in the house for at least 6 months. People with an annual income of more than $80,000 for individuals or $120,000 for couples are not eligible for the grant. The grant is administered by Housing New Zealand.

FirstHome Grant

Eligible First Home Buyers can apply for the FirstHome Grant of 10% of the purchase price, up to $20,000, from Housing New Zealand. This grant was designed for people who have a modest income and can afford mortgage repayments, but have trouble saving for a deposit. The FirstHome Grant only applies to specific Housing New Zealand properties, and these are usually located in country or regional areas.

The great part is that as of 1 December 2015, Housing New Zealand tenants are now eligible to use this grant to buy the house they are currently renting. (This is unfortunately not available in high demand renting areas: Auckland, Wellington City, Christchurch, Hamilton, and Tauranga.) Tenants who live in a not-for-sale house can apply to buy other Housing New Zealand properties that are for sale.

Welcome Home Loan

If you only have a 10% deposit, you can apply for a Welcome Home Loan. The loan is underwritten by Housing New Zealand and only offered by selected banks and lenders – The Co-operative Bank, Heartland Bank NZ, Kiwibank, NZCU Baywide, NZCU Employees, Nelson Building Society, SBS Bank, TSB Bank, and Westpac.

To be eligible to apply for this loan, you will need a minimum 10% deposit, and the price of the house you are buying must be less than the regional house price cap.

Because a 10% deposit means your loan is counted as high LVR lending, you will need to pay a Lender’s Mortgage Insurance (LMI) premium of 1% of the loan value. The lender may also apply a loan application fee.

Kainga Whenua Loan Scheme

Housing New Zealand and Kiwibank have teamed up to provide the Kainga Whenua Loan for Maori individuals and Maori land trusts, to buy a one-storey house on piles (but not the land) located on multiple-owned Maori land.

Applicants need to meet Kiwibank’s normal lending criteria. Lenders’ Mortgage Insurance is provided by Housing New Zealand for the loan.

CANSTAR included the following home loan providers in its comparison of loans for first home buyers.

  1. ANZ Bank
  2. ASB Bank
  3. BNZ
  4. Kiwibank
  5. New Zealand Home Loans
  6. SBS Bank
  7. The Co-Operative Bank
  8. TSB Bank
  9. Westpac

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