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First Home Loan For First Home Buyers
Don’t Let TheMortgage Process Become Overwhelming
Moving into a first home is fraught with legal language, terms, percentages, and endless options. However, it doesn’t have to be an insurmountable hurdle. On the contrary, buying your first home is not only completely manageable, it is exciting. This is your moment to build something bigger than yourself, to invest in your future, and to realize the benefits of wealth building. By providing you and your family ownership of a home, you can truly feel accomplished.
All you need to do is learn the lingo.
What Is A Home Mortgage?
When you buy a home, most likely you don’t have 100% of the cash on hand. Most likely you have either been saving up for a deposit or will be getting help from a friend or family member. The rest of the cash is supplied by a bank to the owner. The owner is fully paid, and you will owe the bank the remainder to be paid in monthly installments. The amount you borrow is considered the “principle.” The cost that you owe to the bank for borrowing the money is called the “interest.” Interest is calculated at a market rate and can be fixed over the life of your mortgage or it can change with time, called a floating/variable interest rate.
Depending on the type of loan you sign up for, the monthly payments may stay fixed, Table Loans, or the payments may decrease with time, Straight Line Mortgage. If you need more funds on hand at first, you may choose to go with an Interest-Only mortgage. These allow you to only pay the interest off at first for a period before starting to pay the principle off.Your mortgage details can be confusing, and it is best to have a mortgage broker on your side. They can explain all of the details of each type of mortgage. They can compare banks and loan companies to find you the best mortgage for your circumstances. Each bank may try to sell you on a certain type of mortgage. A mortgage broker can offer you a comparison value, giving you more knowledge and power in your financial decisions.
Should I work with a real estate agent?
Yes, having a real estate agent on your side will benefit you in the long run. They can help with all of the paperwork, legalities, house hunting, and negotiating all of the final costs. If you are moving to a new area or are planning on a life change, i.e. kids or extended family, they can help you find the home size that fits your needs, and the community services to improve your quality of life. The right schools and the right social services can truly change your life for the better. All of these are benefits from having a real estate agent.
Is There A benefit from the First Home Loan or KiwiSaver programs?
1. What is a First Home Loan?
Not everyone can afford the costs associated with buying a home. The mortgage costs can vary depending on the financial stability of the country and the banking system. It can be entirely too complex when dealing with work, a family, and figuring out where to establish a home. First Home Loans (previously known as Welcome Home Loans and still often referred to as this) are a government supported initiative, backed by Kāinga Ora Homes and Communities, helping you get the keys to a home and a future. Their website has a First Home Decision Tool that can help you determine if you qualify for a 5% deposit First Home Loan or a First Home Loan Grant up to $10,000 or both.
Not everyone will qualify for a First Home Loan. You have to plan to live in your home. It can’t be an investment property. You need to be in a qualified income bracket. This means your annual household income needs to be less than $85K before tax. If you are buying the house with multiple people, like a significant other or family member, the combined annual income must be less than $130K. There are also home value caps depending on where you want to live. These can range from $400K – $650K depending on the location and whether the house is a new build or an existing/older property. The price cap for new builds is greater, between $50K – $100K, than for existing/older homes.
You may even be able to borrow up to $200K for the house cost with no deposit. This can be increased based on your person circumstances. There are different requirements and benefits for Maori land trusts. So, it is best to visit and apply for conditional approval at the Kāinga Ora website. There you can find all the information that you will need to go through the process.
2. Does being a KiwiSaver help at all?
The KiwiSaver program has been an amazing tool for all to help with money management. This voluntary retirement savings scheme provides a lock box for future retirement funds. Generally, you are eligible to receive KiwiSaver funds when your account has matured. This occurs automatically upon reaching the age of 65. This is meant to be the age at which you retire. However, there are allowances for pulling the money out early.
You are allowed to pull finds from your KiwiSaver account early for the following: first home, moving oversees, significant financial hardship, health reasons, or another supported hardship. If you are looking to pull funds out for a first home, you need to be enrolled and contributing to the KiwiSaver program for at least three (3) years.If you are struggling to come up with the down payment on a mortgage, withdrawing funds from your KiwiSaver account is a fantastic way to help bridge any financial gap. Here are some key data points:
- In August of 2020 6,670 KiwiSaver members withdrew some savings from their account.
- This is up from 5,130 in August 2019
- 4,620 withdraws were specifically for the purpose of first home purchase
- $127.6M of the total $141.9 M withdrawn can be attributed to these first home buys
- This means that the average withdraw was about $27K for first home buys
- This is up from 3,580 withdraws in August of 2019
- 69% of all KiwiSaver withdraws in August of 2020 were specifically for home purchases
- 9% of the total value of the withdraws in August 2020 were for first home purchases
Normally, you would still have a tax obligation on any profits your KiwiSaver investments earn. The tax rate depends on the kind of KiwiSaver program you are enrolled in, either widely held superannuation schemes or portfolio investment entities. However, the key consideration for first time homeowners, withdraws from your KiwiSaver scheme are tax-free. Make sure to consult a tax professional for the most up-to-date guidance on distributions and taxes on your KiwiSaver account.
What tips should I know before starting all of this?
The home buying process is long but exciting. Make sure you talk to experts and become as informed as you can before making any decisions. Be prepared with all of the necessary financial documents that you will need to prove your income and bank holdings. This will make the process more efficient and effective.
Having a real estate agent and a mortgage broker on your side will help. They can negotiate for you and help find the right solution for your needs. Lastly, don’t wait for the perfect house and the perfect opportunity. Without the financing in place, you may miss the opportunity or be outbid. Instead, proactive communication and researching on homes will land you not only in a better financial position but also a better home for yourself and your family.