If you’re buying a house or section, you may be eligible for the First Home Grant (previously called the Home Start Grant), giving you up to $10,000 towards the purchase.
There’s plenty of general information about the eligibility criteria and application process online – the Kāinga Ora website is a particularly good resource.
In summary, to be eligible for a First Home Grant you must:
- Be over 18 years old
- Have earned less than the income caps in the last 12 months
- Not currently own any property or land (excluding Māori land)
- Have contributed the minimum amount to KiwiSaver for at least three years
- Purchase a property within the regional house price caps
- Live in the purchased property for a minimum of six months
At first glance, the criteria and rules for the First Home Grant seem relatively straightforward. However, some details about the grant are easily overlooked or misunderstood.
In this article, we’ve outlined 10 important things you should know about the First Home Grant.
1. You can get the First Home Grant in addition to KiwiSaver
Some buyers are under the impression they can’t get the First Home Grant if they’re also withdrawing their KiwiSaver funds, but this isn’t the case.
If you’re eligible for both, you can use your KiwiSaver funds and the First Home Grant – it’s not one or the other.
2. If possible, it’s best to apply for pre-approval
When applying for the First Home Grant, you can either:
- Apply for pre-approval before you start looking for a property
- Apply for approval once you’ve signed a sale and purchase agreement (in some cases)
We’d suggest applying for pre-approval, as it gives you certainty about whether you’re eligible and how much money you’re entitled to.
When you know exactly how much you qualify for, it means you can account for this in your finances and figure out the maximum you can afford to spend on a property.
It also means you’ll have an eligibility letter you can hand over to the bank when applying for finance, which could potentially help you secure more lending.
Note: pre-approvals are valid for six months. If you haven’t bought a home within that timeframe, you’ll need to reapply.
3. You should allow plenty of time for the application process
Even if you have pre-approval in place, you’ll need to allow enough time for your application to be processed so the grant funds are received in time for settlement.
The application process can take longer than you might expect, regardless of whether you have pre-approval. We have to:
- Request an application form from Kāinga Ora
- Meet with you in person to sign the application form, once we’ve received it
- Send the application form back to Kāinga Ora on your behalf
- Wait for Kāinga Ora to process the application and release the funds (this generally takes at least five working days)
If you have pre-approval in place, we’d suggest you allow 10 working days between the date you sign the sale and purchase agreement and the date of settlement.
If you don’t have pre-approval, we’d suggest you allow 15 working days between signing the agreement and settlement.
Either way, it’s important to let your lawyer know as soon as you’ve signed an agreement so they can get the ball rolling and ensure you receive the funds in time.
4. The rules vary depending on the type of purchase
Many buyers don’t realise the grant has different criteria and processes for different types of purchases.
The exact rules depend on whether you’re:
- Buying an existing house
- Buying land to build on
- Relocating an existing house onto a new section
- Buying a property off the plans
- Building on Māori land
For example, if you’re buying land to build on, you’ll need to have pre-approval in place before you purchase the land (you can’t apply for approval afterwards) – and you’ll need to submit your application at least four weeks before settlement.
5. The grant is available per person – not per couple
If you’re buying a property with your spouse or partner, you can each receive a grant (as long as you’re both eligible).
As a couple, this means you would be eligible for up to $20,000 in total.
6. If your spouse/partner already owns a property, you might not be eligible
Most buyers are aware they won’t be eligible for the grant if they already own a property (although there are some exceptions to this rule, as noted in the following section).
However, you may not be aware that you won’t be eligible for the grant if your spouse or de facto partner currently owns a property that you could reasonably be expected to live in or sell.
7. If you own property already, you may still be eligible for the grant
Just because you currently own a property (or have previously owned one), doesn’t mean you’re automatically excluded from the grant.
You might still be eligible for the grant if:
- You haven’t received the First Home Grant before; and
- You’ve previously owned a property, but you don’t currently have significant realisable assets that are worth more than 20% of the house price cap for existing properties within the area you are looking to purchase in
Note: realisable assets are assets you can sell to purchase a home. For example, money in bank accounts, a boat or another vehicle. KiwiSaver funds aren’t considered realisable assets.
‘Previously owned property’ doesn’t include Māori land.
If you own Māori land or you’ve owned a property in the past, we’d suggest you talk to us or contact Kāinga Ora directly to confirm whether you’re eligible.
8. When buying property with others, it has to be in equal shares
If you’re buying a property with other people – whether that’s your spouse, partner, a family member, friend or someone else – you’ll only be eligible for the grant if you purchase the property in equal shares.
This means you either buy the property jointly, or in equal shares (e.g. 50/50 as tenants in common).
9. You may need to have a valuation done
If you buy a property privately (i.e. without a real estate agent), you might need to show evidence that you’ve paid a fair market price for it. In this case, you’d typically need to pay for a registered valuation.
10. In certain circumstances, the grant is repayable
The First Home Grant is generally non-repayable, but there are some situations where it would have to be repaid – usually with interest.
For example, the grant might become repayable if it was discovered you didn’t tell the truth on your application form.
It would also become repayable if you didn’t end up living in the house as your main home for at least six months from:
- The settlement date, if you’re buying an existing home
- The date that the code compliance certificate is issued, if it’s a new build
If you cancel the sale and purchase agreement, that would also make the grant repayable. In this case, you’d have to return the grant funds and go through the application process again if purchasing another property.
This is a very important catch to be aware of, as it can sometimes put buyers in a risky situation. If you use the First Home Grant for your deposit, then you default on your agreement or cancel without a valid reason, you would lose your deposit and have to repay the grant out of your own money.
How we can help
If you’re thinking about buying a property, you should engage a lawyer as soon as possible.
We can review the sale and purchase agreement before you sign it (and add any necessary clauses for your protection), discuss financing and ownership options, help you apply for the First Home Grant and KiwiSaver withdrawal (if you’re eligible) and guide you through the due diligence process.
We’ll need to gather identification documents from you for compliance purposes before we can provide any legal advice or act on your behalf, so it pays to get in touch sooner rather than later.
If you’re thinking of buying a property and you’d like to speak with our team, feel free to contact us on enquiries@armstrongmurray.co.nz or 09 489 9102.
This article is brief and general in nature. You should not treat it as legal advice and should seek professional advice before taking any action in relation to the matters dealt with in this post. Armstrong Murray accepts no liability for losses suffered by any person or organisation who may rely directly or indirectly on this post.
