The property market may have been in a slump lately, but for many New Zealanders buying their first home can still seem far out of reach. Fortunately, there are now a number of different co-ownership schemes available to help first home buyers get onto the property ladder.
Westpac – Family Springboard Home Loan
Westpac Bank offers two options through which a family member can help a buyer with the purchase of their first home.
Under the Co-Borrower scheme, the buyer takes out a home loan for up to 80% of the value of the home. The buyer then co-borrows with a family member in a second shared loan for the remaining 20%. The buyer is required to service both loans, but if they are unable to service the loans at any stage, Westpac may ask the family member to service the shared loan for them.
Under the Guarantor scheme, the buyer combines their deposit with one loan for up to 100% of the value of the home, and a family member provides a guarantee of 20% of the value of the home. If the buyer is unable to service the home loan, the bank my ask the family member to service the guaranteed portion of the loan for them.
New Zealand Housing Foundation – Homesaver
This is a rent to own scheme in which the buyer purchases 60% of the property and the New Zealand Housing Foundation purchases the rest. They then own the property as tenants in common until the buyer is able to purchase The NZ Housing Foundation’s share off them (usually after 7-10 years).
The New Zealand Housing Foundation guarantees that mortgage repayments will not be more than 30% of the buyer’s income.
YouOwn
YouOwn is a privately funded company that provides co-ownership schemes.
With YouOwn the buyer is only required to pay a 5% deposit, rather than the usual 20%. They are required to pay a monthly equity fee to YouOwn and can buy them out 5 years after the settlement date. When the buyer sells the house YouOwn takes their proportionate share of the purchase price.
Every co-ownership scheme has its own unique structure and obligations, and you should seek independent legal advice to determine if any particular co-ownership program is right for your circumstances. Contact us at Freebairn and Hehir for expert advice on your options for co-ownership.