First Home Purchase Funding - What you need to know

Topics covered in this article: Home Owners, Property

Hilary Anderson

Senior Associate

Senior Associate

Phone: +64 7 927 0568
Email: handerson@clmlaw.co.nz

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Bachelor of Laws, Bachelor of Arts (major in Media & Communications, minor in Political Science), University of Canterbury

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Katherine Dentice

Registered Legal Executive

Registered Legal Executive

Phone: +64 7 927 0562


Email: Kdentice@clmlaw.co.nz 

Legal Executive Diploma

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Lucy McDougall

Senior Solicitor

Senior Solicitor

Phone: +64 7 927 0585  

Email: lmcdougall@clmlaw.co.nz

Bachelor of Laws and Bachelor of Arts, University of Canterbury

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The government announced that effective from 1 October 2019, some changes came into effect the first home buyer’s schemes to assist more people into home ownership. The Welcome Home Loan (a loan issued by selected banks and underwritten by Housing New Zealand) is now called the First Home Loan and the KiwiSaver Home Start Grant (detailed below) is now called the First Home Grant. Both policies will allow first home buyers to buy houses with a deposit of just five per cent as opposed to 10 percent for new and existing homes (provided you meet the relevant lending criteria).

 

How the Schemes Work

There are two main and very separate schemes that help first home buyers purchase residential property (new or an existing home) in New Zealand, the KiwiSaver First Home Withdrawal and the First Home Grant (“the Schemes”). In order to use your KiwiSaver savings and/or the First Home Grant towards the purchase of your first home, you must meet the eligibility criteria, summarised in our attached FAQ sheet. It is important to realise that these are two very separate schemes and you may meet the eligibility criteria of one or both.

 

How to Apply/Before you Purchase

Timing is crucial for making withdrawals from the two schemes. It is best practice to obtain pre-approval from Housing New Zealand for the First Home Grant and your KiwiSaver provider as soon as you start looking to purchase a property. This will help speed up the process in the long run and provide certainty around your eligibility. This is by no means the end of the process or a guarantee that you will receive the funding, it is simply pre-approval. Pre-approvals are usually valid for 6 months, but it would pay to check with your provider. 

 

You’ve found the property, what next…

Once you have pre-approval and you’ve found the property of your dreams, you will need to contact your solicitor to review the Agreement for Sale and Purchase prior to signing to ensure you have sufficient time to complete the applications. Ensure you have notified your solicitor of your intention to use KiwiSaver and/or the First Home Grant. They will be able to guide you through the process and the required paperwork. If you leave the applications too late, you may not be able to withdraw the funds as payments cannot be made after settlement.  

The application documents can be located from your KiwiSaver provider and the Housing New Zealand Website. Once you’ve located and completed to the best of your ability the application documents, you will need to see your solicitor to have them witness the statutory declaration and send the documents to the Scheme providers. If the funds are required to pay the deposit, your solicitor will also need to amend the terms of the Sale and Purchase Agreement. For these reasons it is always useful to have your Solicitor check the Agreement for Sale and Purchase before signing. 

You need to allow a minimum of 15 working days (preferably 20) prior to the settlement date, or the unconditional date if you require the funds to pay the deposit. This timeframe allows the provider’s time to process your applications and deposit the funds into your solicitors trust account. Your Solicitor will then make payment to the Vendor on your behalf. 

 

After the Purchase/Settlement

Once you have made your withdrawal for your first home purchase, you can continue to contribute towards your KiwiSaver account for your retirement. You will not be able to make any further withdrawals to purchase a property. 

Below is a link to frequently asked questions on first home funding.

https://www.cooneyleesmorgan.co.nz/vdb/document/59

 

Updated: 03 February 2020