Saving a 20 percent deposit for your first home in Auckland can feel like it’ll take a lifetime. You’re looking at needing $120,000 for a $600,000 home – that’s no easy feat.
Being able to purchase a home with a 10 percent deposit, while still a challenge, feels a lot more do-able. On that $600,000 home, the deposit required would be $60,000, half of that of a 20 percent deposit.
For first home buyers, thankfully, there are a couple of ways to work around the usual 20 percent deposit required by most lenders.
Today we’ll explore one of those, being a Welcome Home Loan. The criteria to be met is firm, but if it can work for you, buying your first home could happen much sooner than you may have thought possible.
Let’s take a look at what a Welcome Home Loan is, who might be eligible and how to take the next steps if it sounds like a fit for you.
What is a Welcome Home Loan?
A Welcome Home Loan is designed to make buying a first home in New Zealand easier. It allows first home buyers to purchase with a ten percent deposit, instead of the 20 percent deposit now required by most lenders.
It’s suited to those who are finding it tough to come up with a large deposit but are in a position to make regular repayments on a loan.
Welcome Home Loans are underwritten by Housing New Zealand but are issued by selected banks, building societies, and credit unions.
The Criteria
Ten percent deposit requirement
You’ll need to have a 10 percent deposit as well as meeting the lending criteria of the lender you choose.
Income cap
If you are buying a home by alone, your combined household income for the past 12 months must have been $85,000 or less (before tax).
If you’re buying a home with one or more others, the combined maximum household income is $130,000 or less (before tax) in the past 12 months.
Maximum loan limit & house price cap
Each region has a house price cap – the maximum purchase price. In Auckland, it’s $600,000 for an existing home and for a new home, the cap is $650,000.
The maximum amount you can borrow for a home in Auckland is the house price cap less your 10 percent deposit.
I can almost read your mind right now….
“But you can’t buy anything decent at those levels in Auckland!”
Yes, you can – really! Each month we profile five homes in five good suburbs which were sold for under $650,000 – check out August and July Suburb Snapshots to see for yourself.
Additional criteria for a Welcome Home Loan
• You must live in the home you are buying.
• Each lender has their own credit criteria you will need to meet along with the standard Welcome Home Loan eligibility criteria
• You’ll need to pay a one percent Lender’s Mortgage Insurance premium. You may also need to pay for a loan application fee.
• You can’t use a Welcome Home Loan to buy an investment property or own any other property.
• You’ll need t be a New Zealand citizen or permanent New Zealand resident.
• A home which received its Code Compliance Certificate less than six months before the lender submits a Welcome Home Loan application is considered a new home.
If you think you may be eligible, these are your next best steps.
First up, check out the official Welcome Home Loan website to find out more.
Then, if you think you could be eligible, contact one of the participating lenders. You’ll find them listed here.
Looking for more?
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