Quite often I will come across clients who qualify for a Welcome Home Loan, so I thought I would write about how the Welcome Home Loan works.
Welcome Home Loan explained
This is a home deposit program from Housing New Zealand and it is designed to help new homeowners buy their first home. It does have some rules around who will qualify and it is not for everyone. In in today’s housing market, the cost of delay is expensive (especially if you live in Auckland!) so my advice is, if you can afford it, and you qualify, buy it because you could always sell it later (and hopefully the value would have increased).
Firstly, let me set a realistic expectation as this is quite often the biggest hurdle for first home buyers on a tight budget.
What can I buy with a Welcome Home Loan?
You need to be realistic in what you expect to buy. In my experience the biggest hurdle for new homeowners entering the housing market is expectation. There seems to be a trade off of ownership vs lifestyle with ownership coming in second best.
It would be home ownership suicide if you would prefer to rent a nicer home, than own a lesser one. This is the biggest hurdle I have seen and if you can accept that you may own a “not so nice a place” than where your currently live, then it’s all a matter of making sure you meet the financial criteria because you have just overcome the emotional one.
What is the criteria?
Q: Where does my deposit come from?
A: With a Welcome Home Loan, you only need 10% deposit with the balance being financed by some of the banks I use. Your deposit can be gifted by a family member or close relative. You could also apply for a KiwiSaver Homestart Grant or a KiwiSaver First Home Withdrawal.
Q: What do I need to be earning to qualify?
A: There are two income brackets which will qualify for a Welcome Home Loan, which are;
- For a single income earner you can be earning up to $80,000 (before tax) or;
- For more than one borrower you can be earning up to $120,000 (before tax)
Q: What price range could I look at buying?
A: This depends on the area which where you are buying, for example if you live in Auckland then the maximum would be $550,000. House price caps have been introduced (based on Territorial Authority boundary areas) and as of 14th June 2015 they are as follows:
- Auckland – $550,000
- Hamilton City, Tauranga City, Western Bay of Plenty District, Kapiti Coast District, Porirua City, Upper Hutt City, Hutt City, Wellington City, Nelson City, Tasman District, Waimakariri District, Christchurch City, Selwyn District, Queenstown Lakes District – $450,000
- Rest of New Zealand – $350,000.
Q: Can I build a new home?
A: Some lenders may allow you to build a new home, but this will depend on the lender, location etc, please contact me if you would like to talk about building a new home.
Q: Can I use the Welcome Home Loan to buy an investment/rental property?
A: No, this is a home loan program for first home buyers wanting to buy a home to live in and you must not own any other property.
What do I do next?
If you would like to apply for a Welcome Home Loan or talk about where you qualify, then please contact me anytime. No matter where you are located in New Zealand, I would be happy to talk to you about buying your first home.