Every year thousands of Kiwis buy their first homes. According to the Real Estate Institute of New Zealand, nearly a quarter of all sales are to first home buyers. There’s no reason why that shouldn’t be you!
Most first home buyers save a 5% deposit. The exception to this is buyers who borrow their deposit or are given it by their parents, and those who can qualify for a Welcome Home Loan.
The “easy” way to save a deposit
Assuming you’re in the 5% club, then you’re going to need to get saving! Even on a $200,000 or $300,000 property you’ll want $10,000 or $15,000 for a deposit plus a bit more for lawyer’s fees, removal costs and other incidentals.
It may seem like a tall order to save that much. But savings have a way of multiplying quickly. Every five or $10 a week you save ““ the cost of takeaways or a bottle of wine ““ can add up to hundreds of dollars by the end of the year. The more of those little savings you can make the better.
Before you start, it’s a good idea to shop around for the right combination of bank accounts. One strategy is to set your accounts up so that your pay is split automatically between bills, spending and savings accounts to reduce the temptation to spend.
Free money, anyone?
If you’re not in KiwiSaver, this is the time to open an account. Some people get their entire deposit through KiwiSaver. Regular savers might be entitled to a first home deposit subsidy and/or savings withdrawals.
The deposit subsidy is $1,000 per year of saving up to five years. That’s $5,000 for a single or $10,000 for a couple free of charge. You need to save a minimum percentage of your salary, which is currently 3%, for three years to qualify. The other main rules are that the property can’t be worth more than $300,000 in most parts of the country ($400,000 in Auckland, Wellington and two other areas) and you can’t earn more than $100,000 per couple or $140,000 for three or more people. You can read more here.
Even if you don’t qualify for the subsidy, you can withdraw your savings, your employer’s contribution and any interest or returns on that money and put it towards your first home.
Sneaky ways to save
If you’re committed to buying your first home it’s worth looking for ways to save more. This might be as simple as your bank’s “Save the Change” scheme, which rounds up every dollar you spend and sweeps the change into your savings account. The more you can save the quicker you’ll buy your first home or the better home you’ll buy.
If you need motivation it’s worth shopping around for savings accounts that give you an incentive to save or penalise you for taking your money out. Check out some options here.
Or it might be cutting your trips to the cafÃ© to one a week or takeaways to once a month ““ with a small incentive at the end of the month if you meet your target.
Whatever you do, think positive. If you believe you can buy your first home you’re well over the biggest hurdle, which is the six inches of grey matter between your ears. Don’t believe people who say “it’s impossible” in New Zealand. People like you buy their first homes every week.