First Home Buyers – fast start to property ownership
If you’re looking to take that first step and get on the property ladder, there are incentives designed to help you get there.
First Home Buyers ( FHB ) get a fast start by allowing up to 95% Loan to Value Ratio ( LVR ) or 5% deposit on their first home, supported by the Govt agency Kainga Ora ( KO ) and provided through selected banks, for everyone else its mostly 80% for owner occupied and 70% for investment property with some variations on that which we’ll touch on in a later article.
If you’re eyeing up say a $600k home your 5% deposit looks like $30k, getting it together can be an individual or joint effort and can come from a combination of sources such as savings, Kiwisaver withdrawal, gifting or bank of mum and dad.
Saving $30k from scratch over 5 years would take $500 week with interest earned just keeping up with inflation but you will get there if you stick with it.
Every $100k of lending over a 30 year term takes $536 mth based on current 1 year rates of 4.99% so that $600k home with a $30k deposit and $570k mortgage would be $3,056 mth or $705 wk equivalent.
Banks use test rates when assessing lending to allow a buffer for potential increases in rates if a financial event occurs such as Covid when fixed rates went from 2.29% to 7.35% so they need to lend responsibly. Currently at 7% so the above example would be assessed at $3,982 mth or $918 wk equivalent.
Then there are Uncommitted Monthly Income ( UMI ) requirements to meet which assesses your income less core expenses including rates and insurance on the new property which determines how much you have left to service a mortgage which will ultimately determine the size of your loan, add your deposit and there’s the value of property you can buy. The above example would require around $4,082 mth UMI with a $100 mth buffer.
Supercharge your borrowing power by having all other loans paid down before you apply as it frees up funds to go toward a mortgage, for example every $10k of limit on credit or store cards attracts a 3% or $300 mth minimum payment assessment whether used or not, whereas $300 mth applied to a mortgage could allow a further $56k worth of home on a 30 year loan at current 1 yr rates of 4.99% or $45k based on a 7% test rate.
We can also look at taking, for example, existing vehicle loans and refinance them onto a separate loan at mortgage rates which can improve the overall cashflow position however it still takes away from the total amount available to purchase a property so best if they’re not there at all.
More features can also include a cash back offered by some banks that can be up to 1% of the loan amount up to $5k depending on who its placed with. Some banks allow up to $20k cash back but you’d need a $2m mortgage.
Second chance loans can apply if you’ve owned a property previously but not for some years and are essentially in the same position as a FHB and meet criteria.
KO eligibility tops out at $90k salary for individuals and $150k salary for couples but banks will still work with you to achieve your goals.
With lots of moving parts, here at Infinance we can walk you through the process to achieve the best outcomes.
Click on the contacts tab below to explore the possibilities 😊
