New Co-Ownership Schemes for First Home Buyers

Many New Zealanders are finding it almost impossible to get onto the property ladder.  Despite current uncertainty in the housing market, Aotearoa’s median house price is still ten times the median household’s disposable income.  As a result, shared ownership schemes have been increasingly common.

Generally, these co-ownership arrangements involve buying a percentage of a property with a silent party providing the balance.  The property is then owned as tenants in common with unequal shares in the property. 

While there are a number of different options out there in the marketplace, here are a few of the more common arrangements:

1. Westpac Spring Boarding

There are two ways that Westpac will provide the option for first home buyers to utilise their parents’ equity for assistance with their purchase. This can be done whether by way of “co-ownership” or “guaranteeing.”

Co-borrowing involves two loans.  First, there is a home loan where you own up to 80% of the value of the property.  The buyer then “co-borrows” with the family member in a second shared loan for up to 20% of the value.  Both the parents and child will be jointly and severally liable to service the loan/mortgage. 

The guarantor scheme has one loan and a guarantee. The family member will provide a guarantee for up to 20% of the value of the home, and you will take on the mortgage solely.  In the event that you as borrower cannot service the loan, the guarantor may be required to do so (like with any guarantee).

2. Rent to Own “HomeSaver” Programme

This is funded by the New Zealand Housing Foundation and operates in a similar fashion to Kāinga Ora’s shared ownership programme.

In order to qualify you must:

• Be a New Zealand Citizen or Permanent Resident
• Be a first home buyer
• Have at least one member of the household in full time employment
• Have manageable debt (not including student loans)
• Have a combined household income $85,000 – $110,000 gross before tax

Under this scheme, you will need to purchase a minimum of 60% of the property and New Zealand Housing Foundation will own the rest. 

You will own the property as tenants in common until you are able to purchase New Zealand Housing Foundation’s share off them.  New Zealand Housing Foundation indicates that this is usually after 7-10 years. 

New Zealand Housing Foundation guarantees that your mortgage repayments will not be more than 30% of your income. 

3. YouOwn

YouOwn is a privately funded company that offers co-ownership schemes. In order to qualify you must:

• Be a New Zealand Citizen or Permanent Resident
• Have a 5% deposit from savings or KiwiSaver
• Be less than $15,000 in debt
• Have household income of at least $130,000

Most homeowners need a 20% deposit to buy a house, but with YouOwn you only need a 5% deposit.  You are required to pay a monthly equity fee to YouOwn and can buy them out after five years of the settlement date. When you sell the property, YouOwn will take their proportionate share of the purchase price.

Before you enter into a co-ownership agreement, you should always obtain independent legal advice to ensure that the arrangement is the best fit for you, and so that you are fully aware of all your rights and obligations if you were to proceed with the arrangement.

Leading law firms committed to helping clients cost-effectively will have a range of fixed-price Initial Consultations to suit most people’s needs in quickly learning what their options are.  At Rainey Collins we have an experienced team who can answer your questions and put you on the right track.