Deposit Options
Deposit Options.
Give your savings efforts a boost with these tips, and find out how the KiwiSaver withdrawal for first home buyers, first home buyers deposit subsidy, gifting & family equity loans can get you closer to owning your home!
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Everything you need to know about using your KiwiSaver savings to buy your first home.
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All you need to know about Low Deposit Loans
As you may or may not know, getting a low-deposit loan with less than a 20% deposit is a lot more difficult and more expensive!
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Having a specific target to work towards will help keep you motivated and focused. Pick a number, set a timeframe, and then get busy saving!
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Get Your Savings On Track With PocketSmith, New Zealand’s Own Budgeting App
Deposit Options
So how do you come up with a deposit for your first home and how much do you need? There are a number of ways you can come up with your deposit. You may also use a combination of options.
Gifting
If you have been gifted a sum of money that you wish to put towards the purchase of your first home, this is possible. But you must provide a letter, or in some cases a statutory declaration signed by the person(s) gifting the money, certifying that the funds are a gift and that there is no requirement for repayment of these monies.
Whilst gifting is accepted by lenders as a deposit, they generally prefer that you are contributing at least 5% yourself through saving or sale of an asset in addition to the gifted sum.
The Best Way –
Good Old Fashioned Savings!
The preferred option is to have saved at least 5% (or more) towards your deposit. This demonstrates to the bank/lender that you have the capacity and discipline to manage your money. You will need to be able to provide proof that you have saved these funds. Usually the banks will accept copies of your savings account which proves your savings history.
Family Equity loans
Some lenders will allow you to use equity in a family member’s home as your deposit. How this works is the bank arranges 2 loans – one for the amount of the deposit (say 20%) the other loan for the balance of 80%.
Loan 1 (being the deposit) is in your name plus your family member’s name.
Loan 2 (for 80%) is in your name only
Loan 1 is for a shorter term – so that you pay it back sooner
Loan 2 is usually for a 30-year period
Important things to know about Family Equity Loans
In the event that you are unable to meet your repayments – your family member(s) will become liable for the repayments on Loan 1 (for the 20%)
Family members will need to complete an application form and must be in a financial position to meet repayments on Loan 1 in the event that you can’t.
A mortgage is taken over your family members property as security for the 20% deposit loan.
Once you have acquired 20% equity in the property yourself through repayment and/or capital gains, your family member’s mortgage can be released.
Family members must seek independent legal advice before signing mortgage documents.
You can use family equity loans in conjunction with KiwiSaver withdrawal, and KiwiSaver first home buyer deposit subsidy and any cash savings (in which case the family loan would be less than 20% of the purchase price).
You may also be interested in :
Helping Hands for Kiwis
All you need to know about low deposit loans
Budgeting and Savings
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