In terms of small towns, Raglan is one of the hardest property markets in the country for first home buyers to crack. Entry level properties in Raglan are around $750,000 now and that’s just too much for many local families – the deposit required and the mortgage payments are too high for the incomes of many families.
You can blame that on any number of things, but the fact is that Raglan is arguably the most vibrant and diverse small town in NZ. Not forgetting the world class surf of course. This attracts buyers from far and wide and that pushes up prices.
So how can Raglan families stop renting and start owning their own homes? Talk to most about how they purchased their first home and they’ll tell you about sacrifice and commitment. That’s a given – without a fair bit of sacrifice and commitment you’re unlikely to achieve home ownership. But even some of the most diligent home buying hopefuls haven’t been able to afford a home in Raglan.
Enter the ‘First Home Partner’ scheme by Kainga Ora (the old Housing NZ government department). Otherwise known as progressive home ownership or ‘PHO’, First Home Partner is a shared ownership scheme for first home buyers who don’t have a big enough deposit and/or don’t qualify for a big enough home loan to purchase a house on their own.
This has been around for a while, but until now it’s been limited to newly built house purchases not existing houses, and your total household income had to be under $130,000 per year.
On Monday 14th August however, the rules are changing and ‘First Home Partner’ will be available on existing/older houses. The income cap is also rising to total household income of no more than $150,000.
Basically, Kainga Ora takes an equity share in a house, which the homebuyer buys out over time. Kainga Ora can contribute up to 25% of the purchase price or $200,000 – whichever is lower. The first home buyer needs to contribute at least 5% of the purchase price themselves. Kainga Ora want the home buyer to buy out Kainga Ora’s share within 15 years (can be extended to 25 years) and this can be done in one lump sum (for example your income has increased and you now qualify for a full mortgage or you sell the house), or by smaller individual payments. When the homeowner buys out Kainga Ora’s share, it will be based on the current market value at that point.
So let’s look at that $750,000 purchase.
The next easiest option would be a 95% ‘First Home Loan’ via Kainga Ora and participating banks. That would require a cash deposit of $37,500 and a bank mortgage of $712,500 plus a fee to Kainga Ora of $3,563. Mortgage payments would be around $1,090/week + council rates and dwelling insurance (around $77/week).
Through First Home Partner, Kainga Ora could contribute up to $187,500 (25% of the purchase price) and the homebuyer would contribute $37,500 (5% of the purchase price) meaning the bank mortgage would be $525,000. Mortgage payments would be around $800/week + around $77/week rates and insurance. That’s $290/week lower payments and could be the difference between home ownership and renting. The more deposit the homeowner can put in the lower the bank mortgage and payments would be.
We’re experiencing significant enquiry about the changes to ‘First Home Partner’ from first home buyers so we’ll be covering this (amongst other important things to know) at a first home buyer’s information evening on Tuesday August 22nd at 6pm at the Ray White office on Bow Street.
