Welcome Home Loan Changes May Benefit Eastern Bay First Home Buyers

4 August 2016
This week, the Housing Minister Nick Smith announced changes to the Government backed Welcome Home Loan which may allow First Home Buyers to purchase a more suitable property in the current bustling market. Previously the caps in place on household income levels and maximum house price under the Housing New Zealand scheme restricted the type of home that could be purchased. 
What these changes mean to buyers hopeful of being able to obtain finance for their first purchase under the Welcome Home Loan scheme, are that now instead of an acceptable income of $80,000, the cap for a single borrower climbs to $85,000, while couples are able to earn $130,000 to still qualify. The upper limit on the property value has also increased, with the cap on purchase price increasing from $350,000 to $400,000 in provincial New Zealand, and $500,000 in major centres such as Tauranga and Rotorua.
 
The Welcome Home Loan is a product developed to assist those with a smaller deposit, who may not qualify under mainstream lenders above 80% LVR criteria. A 10% deposit will allow the borrower to be approved the funds to purchase their first home as long as they have been in regular full-time employment for at least twelve months and have a clear credit history, account conduct and  minimal short term external debt.
 
While the higher price point of properties available to be purchased under the scheme will help with the number of homes available to be bought, it should be remembered that the 10% deposit figure will also increase. Fortunately, a larger number of people are able to access their Kiwisaver balances, as long as they have been enrolled in the scheme for at least three years. All but $1000 may be withdrawn from Kiwisaver for the purpose of a first home purchase, and deposit amounts can be further enhanced by accessing the “Homestart grant” which provides an individual with $1000 for each year they have been paying continually into Kiwisaver up to a maximum of $5000. That means a couple who have been contributing for five years each would be able to obtain an additional $10,000 towards their deposit (This figure increases to $20,000 if purchasing a “new” home).
 
Another important thing to remember with a Welcome Home Loan is that it is backed by Housing New Zealand but is available through a number of different banks, who will each apply their own set of criteria over your application. We have seen situations where clients have had their Welcome Home Loan application turned down by their own bank, only for us to be able to get an approval through another lender, with the same information supplied.  In general, all bank’s Welcome Home Loans are the same as the final approval/decline decision is made by Housing NZ, although there are differences among the appetites of the five banks who offer this type of loan locally, and your best option is to seek the advice of a local mortgage adviser, who not only has access to the product from a range of providers but also has experience in helping people use Welcome Home Loans when the size of deposit required to obtain standard home loans is not readily available. 
 

Published In Whakatane Beacon

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John White - who has written 90 posts

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