Navigating the path to homeownership can feel overwhelming, but every year, thousands of New Zealanders achieve this milestone. Seeking guidance from experts, such as home loan specialists from your bank, can make this journey more manageable and less daunting.
Dianne Jones is a Mobile Mortgage Manager from Kiwibank who specialises in assisting home buyers. She offers valuable guidance over months or even years, covering topics from strategies to accelerate your first home savings to various ways you may get on the property ladder, with your bank’s approval. “We help you understand what you need to consider and what the process looks like,” she says.
Gathering a deposit
Outside of ‘the traditional’ savings there are several strategies first home buyers can use to build their deposit, each offering unique benefits and considerations.
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KiwiSaver withdrawal: Even with the end of First Home Grants, KiwiSaver remains a valuable tool for eligible first home buyers who have been in the scheme for at least three years. “Many first home buyers we see use KiwiSaver to make up a significant part of their deposit,” says Jones. The employer and government contributions help boost the overall balance. According to Jones, many first home buyers she’s worked with contribute more than the minimum 3% into their KiwiSaver accounts, in an attempt to accelerate their first home deposit savings. Locking money away in KiwiSaver can be advantageous, but it's important to check with your provider to ensure you’re in the appropriate fundfor your timeframe.
Co-own with friends, siblings, or parents: First home buyers often team up with friends, siblings, or parents to purchase a property. However, it’s crucial to ensure everyone is comfortable with the arrangement, from who gets what room to what happens if someone wants to sell. “It's quite good if the buyers are already flatting together, as they know they’re compatible,” says Jones. When buying with parents, clarity is key—both sides must agree on the details, such as who will pay the mortgage on the parents' portion of the home. Will the parents cover it, or will the children need flatmates to help with repayments? Whether buying with friends or family, it’s essential to seek legal advice and formalise any agreements.
Gifts and loans: Parents and other family members sometimes provide part of the deposit for a first home. While it can’t cover the entire deposit, since banks need to see that borrowers can save, family contributions can still make a significant difference. Some borrow against their own home to help with a loved one’s deposit, while others already have money set aside to help. “Family members may either gift the money or loan it under a deed of acknowledgement of debt for example, which may be recalled if the recipient's relationship breaks down,” explains Jones. If family support boosts the deposit to 20%, the interest rate on the mortgage may be lower.
Using a Guarantor: Parents, for example, who can’t help with cash for the deposit can instead use their equity - becoming a guarantor for their children’s home loan. This can make it easier for their adult children to borrow. Jones explains, “With this, there is risk particularly if the children can’t pay their mortgage or if the parents want to sell the property offered as security.” Again, you can see the importance of seeking legal advice for these situations.
Talking with Jones, it’s clear she has a wealth of knowledge to share with first home savers looking to make their homeownership dreams a reality. Here are just some of the strategies worth considering.
— Deal with Debt: Jones encourages those with consumer debt to focus on paying it down as quickly as possible. “Reducing debt is crucial when saving for your first home because it frees up more money for your deposit, reduces financial stress, and improves your borrowing capacity,” she explains. Working with your bank to create a plan for faster debt repayment can make a big difference in reaching your savings goals.
— Make Your Savings Work Harder: The essentials of saving, consistently setting aside money and reducing costs, don’t change. To stay focused on your first home deposit, consider creating a separate savings account dedicated to this goal, to watch your savings grow. Setting up an automatic transfer from your main account each payday can help you stick to your savings plan and avoid the urge to dip into your funds. Also, be sure to select savings accounts with competitive interest rates to maximise your returns. Jones advises that Kiwibank offer a range of savings accounts, to suit varying needs.
— Move Home or Find Extra Flatmates: If moving back home is an option, it can significantly boost your savings. “If you can make it work, moving home can be a great way to get ahead,” advises Jones. If relocating isn’t feasible, consider finding additional flatmates to share the costs.
— Take on Part-Time Work: Many first home savers take on part-time work to boost their savings. “Here in the Hawke's Bay, for example, some people take on seasonal work at night or on weekends,” Jones notes. Even if the secondary job doesn’t pay a lot, it’s extra income that you wouldn’t have otherwise. Plus, working part-time often means you’ll spend less.
— Manage expectations: It’s natural to dream of living in a beautiful home, but your first home isn’t necessarily your last home, says Jones. “It’s often a stepping stone to what could be.” With this in mind, you may want to consider buying fewer bedrooms, or accepting that you’ll need rent from flatmates. Buying an apartment or townhouse may be easier than a standalone home. Or choose a property that needs some refurbishment, although beware of taking on big projects, says Jones. They can be expensive. She also advises to get on the property ladder, there are first home buyers willing to move to a cheaper suburb, town, or city.
Ask Kiwibank
Kiwibank is committed to empowering Kiwi on their homeownership journey. “Come to talk to us about how we can help you reach your property goals,” says Jones. “Even if you’re not ready to buy, we can help.”
Talk to a Kiwibank Home Loan Specialist.
