First time home deposits and subsidies

The two questions you raise are fairly complex as they are loaded with ifs ands or buts however the short answer to your question is a simple no.

Your status as a joint-owner of a property (even if it an LTC investment property that you and your brothers rent and have no plans to live in) automatically disqualifies you for the KiwiSaver first-time home subsidy. Or that is what I was told by an agent at Housing New Zealand Corporation. I would double check with them and your provider to be safe as I've had conflicting information in the past (even from IRD) so wouldn't want to mislead you.

Under normal circumstances, i.e. you living in New Zealand and not having owned a home before, you would be eligible to use your KiwiSaver funds (after three years invested in the scheme) as a deposit on a first time home and potentially (depending on your income) be able to receive a another subsidy from Housing New Zealand Corporation, the same outfit that coordinates the Welcome Home Loans that you mentioned.

In case you were curious, the HNZC housing subsidy is $1,000 for every year invested in KiwiSaver up to a maximum of $5,000. If you are going in on a property with other qualifying buyers, you'd be able to pool your money. The income threshold is NZ$100,000 (for an individual and couple) and $140,000 for three or more individuals.

If at some point you sold your share of the property, then you might be able qualify for a KiwiSaver first time home subsidy potentially and there are allowances for previous property owners. (See the Housing New Zealand Corporation Website for details here).

To do so, you would have to meet the following criteria:

  • I have not received the first-home withdrawal before.
  • I have previously owned a home, but no longer have a share in a property.
  • I have a combined yearly income of $100,000 or less (before tax) (for one or two buyers) or, I have a combined yearly income of $140,000 or less (before tax) (for three or more buyers).
  • I do not have realisable assets totaling more than 20 percent of the house price cap for the area I am buying in. Realisable assets are belongings that you can sell to help buy a house. For example if you were buying a house in the $300,000 house price cap area, your realisable assets cannot be worth more than $60,000. Housing New Zealand considers the following to be realisable assets:
    • Money in bank accounts (including fixed and term deposits)
    • Shares, stocks and bonds
    • Investments in banks or financial institutions
    • Building society shares
    • Net equity in property or land (not being used as your home)
    • Boat or caravan (if the value is over $5,000)
    • Other vehicles (such as classic motorbikes or cars — not being used as your usual method of transport)
    • Other assets valued over $5,000.

Welcome Home Loans can, under certain circumstances, be used in conjunction with a KiwiSaver savings withdrawal but not in your case because you own a property already.

These loans allow qualifying individuals to borrow up to NZ$200,000 without a deposit or NZ$350,000 with only a 15% deposit. I was curious to find out what the interest rates are on these kind of loans. I wasn't able to poll all the participating lenders but one of them informed me that rates are quite often 50 basis points higher than their regular going rates on first time home mortgages.

For example, First Credit Union, advises that their welcome home loan rate is presently 6.99%, compared to the standard 6.45%.

Ultimately, it is up to the participating lenders. Another bank, SBS advised that their rates for welcome home loans are no different than their first time mortgages. Their rate, incidentally is 5.65%, so well worth shopping around.

If you ring to get a quote from any of the lenders, don't be shocked when you're told a much higher amount. That's because under recent rule changes by the HNZC, lenders are required to tack onto their quoted rates an extra 1.5%, a cushion for the lenders and corrosive acid test for the borrowers I suppose in case markets when haywire in the intervening time. I'm advised this is a normal practice used for most borrowers going through the process of mortgage approval to determine their ability to service the mortgage. Their actual rate doesn't include the 1.5%.

There's also limits and conditions on where you can buy under this programme. All the more reason to explore all your options thoroughly if you plan to go this route.

I hope this is of some value.