Do 5% Deposit Deals Still Exist

SPEAKER_01 0:00

And today we're gonna talk about low deposit lending and whether we still do that. Hello, Kunch. Yoda, how are you? Wonderful, thank you. So we've been getting a lot of questions recently. I was clients calling in and asking, do you still do five percent deposit deals? Do we do them, Kunch? Yes. Now short answers, yes, we do. So let's rewind back for a moment.

SPEAKER_00 0:24

We don't do, the banks do.

SPEAKER_01 0:26

The banks do. But let's rewind for a moment because we need to explain to people what is actually low deposit. A lot of people will be listening to this for the first time

What Counts As Low Deposit

SPEAKER_01 0:35

and they'll be wondering what is low deposit? So in New Zealand, usually you need to have at least 20% deposit to qualify for a normal client deposit scenario. However, a lot of the time it's very, very hard to save up to 20%. And you feel like you're forever chasing your own tail because the goalpost keeps moving as the property prices keep increasing in price. Like we've seen in 2020 when the price has gone bananas. And before, if you needed only, let's say, 100K for a 500k house, suddenly the houses were 700k. So you needed 40 grand more. Yep. So it's very hard to get that within a short space of time. So for those that don't understand, 20% is the minimum. Anything lower than 20% is considered to be low deposit application. Yeah. Now we're very fortunate in one way that we have a range of lenders on our panel that we deal with that provide us with lending for as little as 5%. Yes. So on a house that's cost 500K, all you need is 25k. Nice. That was a that was a really good math point there. I was like, okay, maybe do some numbers. Okay. 25k. And to be honest, if you've got two people working together, you could actually save that within six months. 100%. Very possible. Yeah. So 5% deposit. However, there are some rules around it.

SPEAKER_00 2:00

Yes, there are. So yeah, with the first home loan that is provided by our lovely King Audar, or we call KO, who pro provide

Kāinga Ora Income Caps Explained

SPEAKER_00 2:12

that um 5% deposit. The general rule of thumb is that income. So income, it's it's it's capped. So individuals income is 95%. So single applicant, $95,000 for your income cap. Per year. The last 12 months. Sorry, yes, for the last 12 months. And then as a couple capped at $150,000 for the last 12 months, or a single parent with a dependent, $150,000 is the cap as well. Yeah.

SPEAKER_01 2:49

When we say the last 12 months, we do not mean the last financial year. The KO providers want you to search actually the last 12 months. So for instance, if you were a high income earner and you never qualified for that, but suddenly you went on maternity leave and had a baby, and then you came back to work, this is your time to apply. Do not miss that window because when they look at the last 12 months, you actually haven't earned that money. So this is your time to go, oh I'm below the income threshold.

SPEAKER_00 3:19

Correct. Yes, that is a good point. But obviously, it is calculated on what that current income is for the year. So your purchase price may not be the goal that you want.

SPEAKER_01 3:30

Not really. No, no. So the income criteria only qualifies you for KO or not, but they do use normal income that you have right now going forward.

SPEAKER_00 3:40

Didn't know that.

SPEAKER_01 3:41

Well, there you go. There you go. You've learned something new today. So this is a loophole I found. I hope they're not listening. Um, but this is the loophole with a lot of our buyers that have high incomes and then they just feel like they can never qualify for that. Go away, have a baby. There you go. Here's a reason for you to have a baby if you ever wanted one. Um and then come back, come back to your high-earning job. So now you're earning 120 again. Yeah. 120,000 per year, plus your husband is earning 120,000 a year, but the last 12 months you haven't been there and you earned 150k together, you can qualify. Okay. And then reuse your current income going forward.

SPEAKER_00 4:19

Yeah. Awesome. That is a really quick good way to get into property market or property ownership, then.

SPEAKER_01 4:26

Correct. And some of the myth with the KO deals is that you have to be in Kiwi Saber for three years or you have to use your Kiwi Saver. This is not true. We have a lot of buyers

KiwiSaver Myths And Eligibility

SPEAKER_01 4:37

that are residents that just came to New Zealand, so immigrants that came to New Zealand, got the residency, and they haven't been in Kiwi Saver for three years, they still qualify to buy a house with 5% deposit. Through Kyanga order. Through Kayanga order. So back in the day, being three years in the Kiwi Saver qualified you for the grant. Yes. So a lot of people still tie the grant to the Kiwi Saver and they tie the KO first home loans to the Kiwi Saver. So again, that's not a thing. So you can still qualify for that.

SPEAKER_00 5:07

Cool.

SPEAKER_01 5:08

The other loophole, there is a bank. We're not going to tell you which bank it is, but if you banked with them for at least three months, had your income going in there, and you know, really good client, doesn't

The Non KO Bank Option

SPEAKER_01 5:19

matter what you're earning, you could be earning 500k if you wanted to. But I'll be questioning why you don't have the actual deposit. Earning 500, but you don't have a 5% or 10% deposit. Yeah. I would be questioning that. But you get the point. So there is a bank that does it outside of KO. So you could be not hitting the income or outside of the income. Yeah. But you only have 5% deposit. We can get you the mortgage with that bank. So they're still open for business, but they do apply margins onto their rates. Yeah. So this is something to watch out for, and the margins can be quite heavy. 1.3%. 1.2. Is it? Or between 1.2 and 1.3%. 1.2, 1.3% depends. On top of the current rate. So if the current rate is 5%, you've got to add another 1.5%. I'm just going to do 1.5%. Yeah. Just to make it easy for counting. We're having girl math today. It's been a long day. So I suggest for those that are sitting on the fence wondering whether they should buy or not, did you know Wellington just had 37% of first-time buyers buying properties? The highest in the country.

Rate Margins And Real Costs

SPEAKER_01 6:21

The highest in the country. So this is your cue. You gotta jump in. And did you know the other piece of statistics in the last 12 months, a lot of investors are looking to get rid of the properties. Yes. So absolutely golden time to jump on the ladder, buy that house, stop paying rent. Some of the calculations I've been doing for clients, they're paying $750 per week on rent. I know. And then when we did their mortgage calculations, they're basically paying the same for their mortgage. If not less, sometimes.

SPEAKER_00 6:48

Yeah. I had a couple $820. That's crazy. And then for the property they, you know, were going to buy, wanted to buy a $550 mortgage. Crazy. Yeah.

SPEAKER_01 7:02

Absolutely crazy. So this is our call to action for you. If you want to find out which bank it is, drop us a line. If you want to know anything more about Kyangora deals, drop us a line. We've got direct channel

Wellington Stats And Next Steps

SPEAKER_01 7:13

with some of the awesome providers out there. We can get the applications turned around quite quick. The ball is in your court, as I always say to the clients. Yeah, get on the letter, people. Hit us up. Yeah. Don't don't sit there and contemplate and wonder, and then five years later go, Oh, I should have done it five years ago. Like, this is the time. The rates are still good and the house prices are still good. Yeah. Awesome. Thank you, Kunch. Thank you. Bye.