Banking on the First Home Grant for your home loan deposit?

It’s likely you were banking on the First Home Grant for your home loan deposit? What can you do now if you’ve been caught short?

Being a KiwiSaver member and eligible applicant would have allowed you to receive a grant of up to $10,000 for a brand new home or up to $5000 for an existing home. On the 22^nd May, Housing Minister Chris Bishop, announced the First Home Grant will be coming to an end, and the government will be re-allocating this funding to help with 1500 social housing. Instead of this being provided by Kainga Ora, it will be supplied by external organisations. This social housing investment will become available from July 2025. No new grants will be accepted effective immediately, Bishop announced.

1News explains, the First Home Loan scheme — which allowed for 5% deposits — and first home buyers’ ability to dip into their KiwiSaver for their house deposit, would remain. The 2024 Budget would allocate $140 million in new funding for the social housing spots — all money from ending Kāinga Ora’s First Home Grants.

“Funding for new social housing places under the previous government ends in June 2025,” Bishop said. “This is yet another unexpected situation that the coalition Government has had to confront.”

Bishop explains, “the Government has made a deliberate choice to reprioritise low value expenditure to more important policy priorities. At a time when the waitlist for social housing is over 25,000 applicants, we have made the tough but necessary call to focus support on New Zealanders who need it most.”

The median of a $5000 First Home Grant, was introduced in 2010, to the lower quartile house price of $255,000 compared to $580,000 in April 2024, meaning the grant has reduced from being nearly 10% of the deposit to just 4%. And while the First Home Grant could be used in conjunction with KiwiSaver, Bishop says it “was an expensive and inefficient way to support first home buyers”.

Last week, RNZ reported about 12,168 applications were approved for a first home grant in 2023. “Applicants who have existing approvals can still access the First Home Grant, and pre-approvals will still be valid for six-months from the application approval date.”

Banking on the First Home Grant for your home loan deposit? What can you do now if you’ve been caught short?

Stuff.co.nz has outlined several options that are worth considering if you find yourself in this situation.

Shared Equity/Ownership:

• You could team up with another person or third party (government, a council or iwi) to get a mortgage. Read everything you need to know about getting a mortgage. 
• This means that the third party/other party would contribute a chunk of value and would own a corresponding share of the home. The buyer can then purchase that share over an agreed period of time, if the property is not sold before this happens. If the property is sold before, the co-owner would need to be paid out a % of the sale price equal to their share.

Family Equity Loans:

• Similar to the above, but gathering up any potential relatives that are interested in purchasing with you.
• The first loan (for the deposit) is in your name, as well as your family member’s name, and is over a shorter term so it is paid back sooner and your folks (presumably) are off the hook.
• The second loan (for the other 80%) is in your name only and usually for a 30-year period.

Kāinga Ora First Home Loan:

• This is a Government scheme to help first home buyers. Loans are underwritten by Kainga Ora, which means banks can be more flexible about lending.
• Loans require a 5% deposit.

KiwiSaver Withdrawal:

• If you’ve been contributing to KiwiSaver for at least 3 years you might be able to withdraw these savings to put towards your first home.
• You must leave $1000 in your account.

Any of the above require careful planning to ensure their meet your situation and goals. Check out our FAQ’s to get your head about the basics and then contact a Properli Financial Adviser who can provided tailored advice and support for you to achieve your goals, even if it might require an unexpected plan B to reach it.

Sources:

https://www.1news.co.nz/2024/05/22/budget-2024-first-home-grant-cut-1500-social-homes-in-its-place/?gad_source=1&gclid=Cj0KCQjwu8uyBhC6ARIsAKwBGpT3Nny-8sr39HkoIJlMA_iB9-5zwpdmzpq-hqI7zd1VXsVb2dXIBbgaAmwrEALw_wcB&gclsrc=aw.ds

https://www.stuff.co.nz/money/350284724/first-home-grant-gone-what-other-help-out-there