Many new home buyers in New Zealand are finding it impossible to get on to the property ladder. With house prices rocketing, for many it seems like investors are the only people who can afford to purchase properties.

This is why the New Zealand Government has launched a shared-ownership product, First Home Partner. Through First Home Partner, Kāinga Ora will purchase a brand-new property with an eligible household, as tenants in common in unequal shares. The project aims to help First Home Buyers who earn enough to service a standard home loan but need help getting a deposit together.

How does shared ownership work?

You and your household will purchase a home but will share ownership with Kāinga Ora. You will be the majority homeowner and occupier, but Kāinga Ora will own a share in the home that you will buy out over time.

How the home is shared will depend on several factors, such as:

• Your contribution to the deposit;
• The amount the bank is willing to lend you
• Kāinga Ora’s contribution to the purchase

To be eligible, you need to be able to contribute a minimum of 5% toward the home purchase. The maximum contribution Kāinga Ora will make towards a home purchase is 25% or $200,000 – whichever is lower.

Shared Ownership, Shared Responsibilities

If you participate in the First Home Partner Scheme, you will need to enter into a shared ownership agreement with Kāinga Ora. This shared ownership agreement will outline both yours and Kāinga Ora’s respective obligations and responsibilities for the duration of shared ownership.

You will be responsible for legal and other typical costs involved in the purchase of the home (e.g., conveyancing, LIM, builder’s report, etc.).  You will also need to pay all ownership costs associated with the home (e.g., rates, insurance, body corporate or residents’ society levies, and home maintenance).

As you are the majority homeowner, and Kāinga Ora will not use or occupy your home. You can make the household your own, including furnishing and decorating. However, you will need to seek permission from Kāinga Ora before renovating the property, or if you want to sell your home.

You will also need to commit to living in the home as your primary place of residence for at least three years from settlement. Each year, a Kāinga Ora Relationship Manager will meet with you to review your household’s financial situation and plan to have you reach the goal of achieving full home ownership.

You should endeavour to purchase Kāinga Ora’s share in the home by within the first 15 years of ownership. You are obliged to have purchased the share in full by the 25th anniversary from the date of settlement on the home. Kāinga Ora will also set limits on the amount of debt that you can incur in relation to the home and otherwise.

How do I participate?

There are several things you will need to do, to use the First Home Partner Scheme. First, you will need to check your eligibility, (discussed later on). Next, you will need to submit a first home partner application online. If your application is successful, Kāinga Ora will be in touch to explain to you your obligations and responsibilities as a shared owner. They will also estimate how much Kāinga Ora can contribute towards your purchase. Next, you will need to get a home loan preapproval. Once you have a preapproved loan amount from the bank, Kāinga Ora can confirm the equity contribution that they’ll be able to make. Then it’s time to purchase a house. Kāinga Ora will then ensure its conditions are met and will help you through the purchase process. Lastly, Kāinga Ora will assign to you a relationship manager. This manager will meet with you each year to support you through the period of shared ownership, until you can finally buy out Kāinga Ora’s share in the property.

Am I eligible?

To be eligible for the First Home Partner Scheme, you must:

• Be over 18 years old; and
• Be a New Zealand citizen, permanent resident, or a resident visa holder who is “ordinarily resident in New Zealand”; or be applying with someone who meets the citizenship or residency requirements, and you are married to or in a civil union or de facto partnership with that person; and
• Have a total household income before tax of no more than $130,000; and
• Have a good credit rating (subject to a credit report); and
• Be a first home buyer or have previously owned a home but no longer do and are in the same financial position as a first home buyer; and not previously received shared ownership support from Kāinga Ora; and
• Be able to contribute a minimum of 5% of the purchase price of the home; and
• Be buying the home for you to live in and commit to living there as your primary place of residence for at least three years.

The First Home Partner Scheme is an excellent pathway for first home buyers to get onto the property ladder. Provided you understand your obligations and responsibilities, we recommend you take full advantage of this amazing opportunity.

If you would like more advice regarding the First Home Partner Scheme or if you require some assistance on purchasing a home generally, please contact Wakefields Lawyers on 04-970-3600 or email info@wakefieldslaw.com.

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