ASB joins Kiwibank, Westpac SBS Bank, The Co-operative Bank, Unity, Nelson Building Society and NZHL who are already part of this scheme.
The first home loan is designed for people who can afford regular mortgage repayments but are finding it difficult to save a 20% deposit. Instead of the standard deposit, eligible buyers can purchase their first home with just 5%, with the loan underwritten by Kāinga Ora.
Eligible customers who have been contributing to KiwiSaver for at least three years may also be able to withdraw their savings to put towards their home purchase and will be eligible for ASB’s first home buyer cashback offer. The offer is at least $5,000 for mortgages of $200,000 or more.
However, borrowers will be required to pay a one-off Lenders Mortgage Insurance (LMI) fee of 1.2% of the loan to protect the lender. On a $500,000 mortgage that is about $6,000 that either needs to be paid when the loan is drawn down or added to the total mortgage amount.
ASB executive general manager personal banking Adam Boyd says home ownership is a cornerstone of financial wellbeing and security for many New Zealanders.
“This loan helps to get more people into their own homes without the challenge of saving a large deposit while managing everyday expenses, like rent.
“By offering the first home loan, we’re helping to break down one of the biggest barriers to homeownership and opening doors for more New Zealanders to create their future and put down roots in their communities.”
Key Mortgages director Jeremy Andrews says all banks have slightly different criteria. “We have yet to see which banks work out of the best for the scheme.
He says while ASB might not be negotiating much on pricing, it has one advantage in that it will take into account the rent from two boarders. Some other banks will only take the income from one boarder into consideration for a low deposit loan.
“In the case of ASB, that might increase the purchase price for a low deposit borrower by around $200,000 for two boarders. If a mortgage holder has two flatmates/boarders for five to ten years or more it means they can pay off a massive additional chunk of their mortgage in that time. It also moves the borrower into a much different category of house.”
ASB will also look at whether it can do the mortgage itself without Kāinga Ora. If a borrower has a 10% deposit and its current policy allows somebody to buy a property with a 10% deposit they might not send the application to Kāinga Ora, which can be a slight downside if a client preferred that scheme.
Kiwibank, for example, even if it does have funding outside Kāinga Ora, will allow a mortgage adviser to recommend which channel the client wants. “Does the client want to go the Kāinga Ora route and have low interest rates locked in or consider the bank route where they don’t have to pay the upfront LMI fee but pay a higher interest rate until they reach 20% equity.
If a client has a 5 or 10% deposit it is probably going to work out in their favour to pay the LMI fee and get the best interest rates.
Kāinga Ora will remain the gatekeeper for applications.
NZ Banks are offering cash incentives to retain existing home loan clients. Jeremy of Key Mortgages summarizes with NZ Herald, whether to switch or stay depends on factors like break fees, equity, and overall costs. We can help and negotiate with your current bank to find which is the smarter move.
Key Mortgages recently joined Ryan Bridge on Newstalk ZB, to discuss the recent jump in mortgage rates and what it means for Kiwi borrowers.
Key Mortgages shares details with Good Returns how expanded low-deposit lending options may help eligible first home buyers enter the market sooner and with better pricing
As featured in Stuff, buying property with friends or family can improve affordability, but clear agreements and proper structure are essential.
Banks and Mortgages advisers discuss with New Zealand Herald, why home loan approvals may take longer as lenders apply more detailed affordability checks and tighter financial assessments.
In our recent discussion with Radio New Zealand, we shared that age alone doesn't prevent home loan approval, but lenders carefully assess retirement income and long-term repayment plans.
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