The first home buyers grant explained

If you’re a first-home buyer or in a similar position and have been saving into KiwiSaver and meet the criteria, you can get a grant of up to $10,000 per person or $20,000 per couple. The fact that many first-home buyers receive the First Home Grant is one of the reasons why being a KiwiSaver member and making KiwiSaver contributions is such a good idea.

Here’s what you need to know

To qualify for the First Home Grant, you need to have been saving into KiwiSaver for at least three years.

If you want to buy an existing home, you’ll qualify for $1000 per year from three years, capped at $5000. Double that to $10,000 if you’re a couple.

It gets even better if your first home is a new home. You can qualify for up to $10,000 per individual or $20,000 for a couple. That doubles again if the home meets the description of a new build.

If you earn too much or the property is priced more than the upper regional limits, you will not qualify for the First Home Grant. You also need to qualify for a home loan from your bank or other lender.

For the income cap you must not be earning more than:

• $95,000 for a single buyer, or

• $150,000 for two or more buyers.

The purchase price cap starts at $400,000 for an existing home or $500,000 for new in many parts of New Zealand. It’s higher in most of the big cities, rising to $625,000/$700,000 for Auckland. You can check out your local price caps here.

The process

Speak to your mobile mortgage manager or independent mortgage adviser early to ensure you navigate the application process correctly. It would be gutting if you planned to use your KiwiSaver funds for a first home and found you couldn’t.

The application process takes about 20 days, so don’t be that person whose application isn’t received until after settlement when it’s too late.

The two ways to apply are:

• Apply for a First Home Grant pre-approval before buying a house to give you certainty around your eligibility, or

• Apply for grant approval once you find a property and have a signed sale and purchase agreement.

First Home Grant and new builds

You can use the First Home Grant to buy an existing house or a brand new one.

It’s especially important with a new build to get a lawyer involved early. Some of the rules can be tricky. For example, a “new home” means one that must have received its building code of compliance certificate fewer than six months before the grant application date. Otherwise it’s not “new”, even if it hasn’t been lived in.

With new builds you’ll find a number of hoops to jump through such as:

• You must have plans to build or relocate a home immediately after grant pre-approval

• Have signed a fixed price building contract with start and finish dates

• Have your grant pre-approval in place before you buy the land and have signed the sale and purchase agreement

• The total combined costs of land and home must be within the property price caps for your region, and

• You must build a permanent home, not a transportable property such as a tiny home on wheels.

In some cases with off-the-plan purchases, the grant can be paid before settlement date to help with the initial payment or progress payments providing it’s held in trust until settlement.

Some tips to keep in mind include:

• Watch out for income cap. Squirrel Mortgages founder John Bolton says income cap relates to your previous 12 months earnings. If you’re about to get a pay rise or bonus and go over the cap shortly then get your pre-approval in place before then.

• Consider KiwiBuild. Bolton recommends clients put their name in every KiwiBuild ballot they can because the purchase price of the homes are all within the Auckland cap at least. They’re also priced below market value which means you get a bargain.

• You must live in the home for the first six months. You can’t use your First Home Grant to buy an investment property. That’s six months from settlement date for an existing home or, if it’s a new build, the date the code compliance certificate was issued.

• Previous owners may qualify. If you’re now in the same situation as a first-home buyer you may still qualify. That’s providing you’ve not received a KiwiSaver grant or withdrawal before and don’t have more than 20% of the price cap for your region in assets such as money in the bank, shares, boats, or caravans.

Kāinga Ora has a helpful First Home Decision Tool on its website which can help you determine if you’re eligible for the First Home Grant and also the First Home Loan scheme, which would enable you to buy with a 5% deposit.

First-home buyers can also withdraw all but $1000 of their KiwiSaver savings including tax credits even if they don’t qualify for the First Home Grant. Read more about first home withdrawal.

First Home Grant on ancestral land

If you’re Māori and you have a right to live on multiple-owned ancestral land, you may qualify for a 100% mortgage to build or relocate your home under the Kāinga Whenua scheme run jointly by Kāinga Ora and Kiwibank. This is separate from KiwiSaver.

Wondering what your next steps are once you've figured out your KiwiSaver? Our first home buyers hub has some tips and tricks about calculating how much you can borrow for a home loan. Once you've read up on that, check out our articles on your next steps: paying the deposit on your dream home.