Financing Options for New Build Properties in New Zealand

‍

When considering the purchase of a new build property in New Zealand, it's essential to understand the various financing options available. New builds can offer significant advantages, such as modern amenities, energy efficiency, and lower maintenance costs. However, financing a new build can differ from purchasing an existing property. Here, we explore the key financing options to help you make an informed decision.

‍

1. Traditional Home Loans

Traditional home loans are available for new builds, much like they are for existing properties. These loans can come with various interest rates and terms, so it’s essential to shop around and compare offers from different lenders. Key benefits include:

• Fixed and Variable Rates: Choose between fixed rates, which provide stability, and variable rates, which can offer lower initial rates.
• Flexibility: Many traditional home loans offer flexible repayment options.

‍

2. Construction Loans

Construction loans are specifically designed for building new homes. These loans typically release funds in stages as the construction progresses, ensuring that the money is used for its intended purpose. Key points to consider include:

• Progress Payments: Funds are released at different stages of the build, such as land purchase, foundation laying, framing, and final completion.
• Interest Only: During the construction phase, you may only be required to make interest payments, which can ease cash flow until the property is complete.

‍

3. Turnkey Financing

Turnkey financing is a popular option for new builds where the property is ready to move into upon completion. With a turnkey loan, you generally pay a deposit upfront, and the balance is due upon completion. Benefits include:

• Low Initial Outlay: Typically, a deposit of around 10% is required, with no further payments until completion.
• Simplified Process: Turnkey loans simplify the financing process, as the builder manages the construction and financing stages.

‍

4. KiwiSaver HomeStart Grant

First-time homebuyers can take advantage of the KiwiSaver HomeStart Grant, which provides financial assistance towards purchasing a new build. Eligibility criteria include:

• Contribution Period: You must have contributed to KiwiSaver for at least three years.
• Grant Amount: Up to $10,000 for individuals and $20,000 for couples, depending on the length of contributions and whether you are buying a new build or an existing home.

‍

5. Welcome Home Loan

The Welcome Home Loan is designed to help New Zealanders with low to moderate incomes buy their first home. Managed by Kāinga Ora, this loan requires a lower deposit than standard home loans:

• Low Deposit: As little as 5% deposit required.
• Income Limits: Applicants must meet specific income criteria to qualify.

‍

6. Bank Pre-Approval

Securing pre-approval from a bank can provide a clear budget and streamline the purchasing process. Pre-approval offers several advantages:

• Budget Clarity: Know exactly how much you can borrow, aiding in property selection.
• Negotiation Power: Sellers may favour buyers with pre-approved financing, giving you an edge in negotiations.

‍

Tips for Securing Financing

• Compare Lenders: Different lenders offer varying terms, rates, and conditions. Shop around to find the best deal.
• Consult a Mortgage Broker: A mortgage broker can help navigate the various options and find the best financing solution tailored to your needs.
• Check Eligibility for Grants: Ensure you understand and apply for any grants or assistance programs you qualify for, such as the KiwiSaver HomeStart Grant.

‍

‍

Conclusion

Financing a new build property in New Zealand offers several options to suit different financial situations. Whether you opt for a traditional home loan, construction loan, or take advantage of grants and low-deposit schemes, understanding your options is key to making the best decision for your new home investment. Always consult with financial advisors or mortgage brokers to tailor the best financing strategy to your circumstances.

For more information and personalised advice, reach out to our team at KEY2 Real Estate. We're here to help you navigate the exciting journey of purchasing your new build property.

‍