How to build your deposit with help from Kāinga Ora

Many Kiwis have recently found that no matter how hard they try to save for a deposit, property prices continue to rise beyond their reach.

The “deposit gap” has been impacted by changes to the LVR (Loan to Value Ratio), where banks and other lenders typically require a deposit of 20% of the property value.  If a property is worth $800,000 – that would mean a deposit of $160,000 – which is well beyond the reach of most first home buyers.

To help bridge this gap, the Government has set up a progressive homeownership fund designed for first home buyers who need a little extra help to get into a brand-new home. Managed by Kāinga Ora, this new programme is called First Home Partner. 

Check out the infographic we've put together to explain the process here or continue to read below.

How does First Home Partner work?

Essentially, Kāinga Ora will partner with you to buy a share of the home, reducing the deposit required and enabling you to build up the equity required to buy out their share over time.

If you’ve got a reliable income and are earning enough to meet the bank’s mortgage lending criteria, but are struggling to save for the full deposit, then Kāinga Ora can partner with you to get you into your first home.

A share in the house.

Kāinga Ora makes the house purchase with you, but you are the majority owner, with at least 5% deposit and a bank home loan of up to 80% of the home’s value. Kāinga Ora will own up to the remaining 25% which you buy out over time until the home is totally yours.

Just as a normal house purchase shows joint owners (tenants in common), your home ownership will show the shared partnership with Kāinga Ora.  When you finally buy out their share, the title is changed to show you as the sole owner. You must buy out Kāinga Ora’s share within 25 years, and you are encouraged to do your best to buy it out within 15 years. Kāinga Ora will work out a repayment plan with you to make sure that’s achievable.

What goes up. Gets shared.

Because you are sharing the ownership of the home, Kāinga Ora also gets to share in any capital gains on the property up until the point that you buy them out. If the house goes up $100,000 and the ownership split is 80% you / 20% Kāinga Ora, then you’ll keep 80% of the capital gain and Kāinga Ora will retain 20%.

The great news is, as long as you pay back the share held by Kāinga Ora within the 15 years – you won’t be charged a cent for the shared ownership. So it’s like an interest-free loan. After 15 years you will be charged an annual administration fee to cover Kāinga Ora’s costs..

Your home. You’re in charge.

Kāinga Ora is really a silent partner in the deal and as such doesn’t get involved in the day-to-day care and maintenance of the home.  So you can furnish it and decorate as you like. But if you want to make a major change that might alter the value of the home…you will need to get approval from Kāinga Ora before you can do this.

Are you eligible for First Home Partner?

There are quite a few requirements to qualify for Kāinga Ora’s First Home Partner. One of the main criteria is you can only have a total household income before tax of no more than $130,000 and you must have a deposit of at least 5% of the purchase price of the home you are buying.  You must also be buying the house to live in for a minimum of 3 years. So you can’t buy it and rent it out until those 3 years are up. The maximum contribution Kāinga Ora will make toward your property is 25% or $200,000 - whichever is lower.

For full eligibility visit the Kāinga Ora website.