1 August 2016

From Monday 1 August 2016, income caps will increase from $80,000 to $85,000 for a single person and from $120,000 to $130,000 for a couple wanting to use the Kiwisaver HomeStart scheme.

The Government is adjusting both the income caps and house price caps to allow first home buyers access to homes in a more realistic price range when using the Kiwisaver scheme.

HomeStart Grant

The HomeStart programme helps first home buyers put together a deposit by granting them up to $10,000 for an existing house and $20,000 for a new home, on a joint basis.

House price caps will increase by an extra $50,000 from the existing $350,000, $450,000 and $550,000 (depending on region) to $450,000, $550,000 and $650,000 for a new home.

The top price cap applies only to Auckland, the middle tier covers Wellington, Christchurch, Hamilton, Tauranga, Queenstown and Nelson-Tasman, with the remaining tier relating to the rest of the country.

Welcome Home Loans

The increases in income and house price caps will also apply to the Welcome Home Loan scheme which is exempt from the loan-to-value ratio (LVR) limits of the Reserve Bank. This scheme allows first home buyers to purchase with a 10% deposit.

All new builds are exempt from the LVR rules as well, but are still subject to the credit policy of each bank.

How does this work in reality?

Meet John and Megan, they each earn the average income of $60,000 and have both contributed to Kiwisaver for five years.

If John and Megan are buying a newly built home they can get the following Kiwisaver assistance

Kiwisaver withdrawal                     $45,000
HomeStart Grant                           $20,000 ($10,000 each)
Home deposit                                $65,000

If they are buying an existing home the HomeStart Grant reduces to $5,000 individually, or $10,000 for a couple.

With a $65,000 deposit, John and Megan may be eligible for a Welcome Home Loan, which requires only a 10% deposit. They may also be eligible for a normal home loan depending on each bank’s balance sheet position at the time. This could put them in the market for a new home valued up to $650,000.

Need help?

If you or someone you know are looking to purchase a first home, our mortgage brokers Pete and Vickie can help with this process. Remember their advice and time are free!

Call Pete +64 27 249 6764 or email pete@toconvey.co.nz

Call Vickie +64 27 230 6091 or email vickie@toconvey.co.nz