Banks typically require you to have a 20% deposit. But there are ways you can still get into your first home with less than that. In fact, there are heaps of schemes that will help you to get yourself onto the property ladder.
Banks typically require you to have a 20% deposit. But there are ways you can still get into your first home with less than that. In fact, there are heaps of schemes that will help you to get yourself onto the property ladder.
Here are some options for you to consider when buying your first home with a low deposit:
It is buying a house with someone that is not your husband or wife. Co-ownership exists if you buy a property with your girlfriend or boyfriend, parents, friends, siblings or extended family. Co-ownership can exist with lots of people — not just one other. There are even co-ownership models with companies such as Kainga Ora and YouOwn.
With rising interest rates and a dramatic rise in the cost of living, buying a property may feel out of reach. But this is only true if you are trying to buy a house on your own. Co-ownership means that you can buy a house with other people (co-owners) and put together your deposit. Individually it may not be a lot, but together it could be enough to buy space for everyone.
The advantages of Co-ownership are:
Slice helps first home buyers and co-owners with cutting edge legal support; getting you on the property ladder sooner, smarter and safer.
Working with Slice on any of these providers will give you the confidence that you will be making the right decision. We are independent and work with lawyers that know co-ownership agreements inside out.
The First Home Partner scheme is a program that helps people who want to buy their first home but don't have enough money for a deposit and home loan. It allows them to purchase a home together with Kāinga Ora, so they can find a home that meets their needs and aspirations.
The way that it works is that Kainga Ora will own a minority share of your house but you will buy it out over time. So what does that shared ownership look like? It depends on the following:
Kainga Ora’s maximum contribution is either 25% or $200,000 — whichever is lower. From here, you will get an agreement which will outline how much of a share Kainga Ora will have. As mentioned, you then can slowly buy Kainga Ora out.
You will also need to fill out a Co-Ownership Agreement which you can get from Slice.
The Housing Foundation, founded in 2001, is a charitable organization that aims to provide affordable housing solutions for New Zealand households. Its focus is on working families who face challenges in purchasing a secure, comfortable, and energy-efficient home. The Housing Foundation works in collaboration with Iwi, other organizations in the housing sector, and receives support from prominent philanthropic institutions in New Zealand, such as The Tindall Foundation.
YouOwn is similar to New Zealand Housing Foundation. In fact, two of the founders actually were senior leaders at NZ Housing Foundation. The difference between the two organisations is that YouOwn is privately held. It is independent of builders, real estate agents and home loan lenders. There are also no income caps or eligibility criteria specified by the government.
The way that it works is that YouOwn will top up your deposit required for regular bank lending. YouOwn will only ever own 10-25% of your property, depending on the agreement. This will depend on your contribution.
W
ith you being the major shareholder, you can buy out YouOwn after five years (again, at an independently assessed market value). You will be responsible for all the usual ownership costs like rates, maintenance and insurance. Furthermore, until you buy out YouOwn, you’ll pay an equity charge of 5.95% (current rate) on the money they have invested in the property.
Want to learn more? Head over to YouOwn. And if you want Slice to look over the contracts for you, let us know 🙂
Squirrel is a mortgage broker and lender. It launched Launchpad Home Loan in 2021. It is aimed at those who earn a lot but can’t get the 20% deposit preferred by banks and lenders. It’s also targeted at those that are outside of the Kainga Ora qualifications because of the income bracket or house price cap.
The way that it works is that squirrel can lend a maximum of $120,000. The lender is also expected to break the loan up into two parts: base and equity. The base loan is 80% on a 30 year term. Payments start off as interest only so that you can focus on paying off the smaller, amd more expensive equity loan first.
The equity loan is up to 15% and it’s peer-to-peer funded. As Squirrel puts it, it’s a bit like getting help from your parents but without any awkward conversations. You can make extra payments on this five year loan at any time at no extra cost because you want to get rid of it faster. The interest rate is currently set at 9.95% in May, 2023
Aera is a financial services platform which aims to provide a place where you can both save up a deposit and take out a loan. It is not a registered bank. Aera claims that it can offer much higher savings rates because it uses similar strategies as banks and wealth management firms for higher returns.
The way that Aera works is that they will help you find a house, and monthly payments go towards building your deposit credit, getting you mortgage ready over time. And once you are mortgage ready, you can buy the house outright. You pay the pre-agreed price knowing the market can’t run away from you.
Aera suggests your eligibility will centre mostly around your ability to make healthy monthly payments.
Monthly payments for a $750,000 home might start at around $5000 a month. This payment would cover your rent, as well as building up your deposit credit. You’ll need to meet standard eligibility requirements, such as a responsible financial history, credit score and a strong commitment to buying your first home.
You can still buy a property with a low deposit. It requires a bit more research and an understanding of terms and conditions. But it is certainly possible. And with house prices in a lull and interest rates very high, it is a perfect time to buy a property with others — whether it is with friends, family, or an organisation.
Reaching out to Slice will be a great way to better understand these terms and conditions and we can help you put together a plan on how to get into your first home.
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