The Reality of KiwiBuild House Deposits and Mortgage Availability

KiwiBuild is the talk of the town as Kiwis nationwide wait for the opportunity to buy an affordable first home.  While KiwiBuild is well-intentioned, some of the rules attaching to KiwiBuild will limit the ability of purchasers to obtain mortgage lending.

KiwiBuild is the Labour government’s housing project that promises to deliver 100,000 modest properties within ten years for first-home buyers all over New Zealand. The reality of the situation is that first-home buyers will still need to be able to fund a minimum of 10% of the purchase price from their own cash resources (including their KiwiSaver and HomeStart grants).  The KiwiBuild program requires that house prices are no more than $500,000 (except in Auckland and Queenstown where it can be $650,000).

Most banks require purchasers to have 20% of the purchase price.  To help buyers, the government has said that it will make Welcome Home Loans more accessible.  If a buyer meets the Welcome Home Loan eligibility requirements, participating banks relax their normal lending criteria so that only a 10% deposit is required.  Outside Auckland and Queenstown that will mean that a maximum of $50,000 will be required as a deposit.

However, many mortgage brokers have advised that lending 90% of a home’s value to a potential KiwiBuild property buyer may be problematic due to the stringent rules around on-selling. KiwiBuild homes cannot be sold or rented out for three years, which makes the mortgage riskier to the lender.

In a recent interview with Stuff NZ, Jenny Campbell from The Mortgage Supply said: “The lenders are very uncomfortable lending on properties that have restrictions on further sales or renting capability.”

There are many factors that impact whether banks or other lending entities will accept a 10 or 20 per cent deposit for a house purchase, including debt, employment stability, credit card facilities, children, and other important factors.

For more information regarding KiwiBuild and expert first home buyer assistance, contact the Wellington property conveyancing experts at HomeLegal today by visiting the website at https://homelegal.co.nz/.