Tuesday, 27 September 2016
Building and Housing Minister Nick Smith recently announced changes to the KiwiSaver HomeStart scheme that include raising the income threshold and house price caps – up to $650,000 for a new home in Auckland – to make it easier for buyers to get into their first home.
The Minister said changes to the Reserve Bank’s loan-to-value ratios from 1 September 2016 also makes it ‘harder for low equity housing investors’, and that this will favour first home buyers.
However, in places like Auckland where the average house value has just hit $1 million, conditions are still tough for young people who want to buy their first property. Auckland investors buying in other parts of the country, among other factors, are contributing to rising house prices throughout New Zealand.
Spicers Financial Adviser in Takapuna, Barry Perrow, says that parents or grandparents who are in a position to gift money towards a home are usually able to do it because they have done their financial planning and they have sufficient resources.
“You may want to gift money to your children, but I always tell my clients to take legal advice first. For example, parents may want to gift a young couple a substantial amount of money towards a home, but other considerations like the couple getting divorced need to be taken into account,” he said.
Options like applying for a reverse mortgage, gifting a deposit, lending the money for a deposit, borrowing jointly or providing guarantees to the bank will most often involve an element of risk.
Gifting a deposit or lending money means you have less money to invest, so you will lose out on investment returns you may need as you get older, while borrowing the money or accepting legal liability – such as a guarantor – could leave you with debt when you least want it.
Ultimately, whichever strategy you choose, there will be a cost to you in some way, shape or form. The question to ask yourself is, can you really afford it?
There are so many variables involved in each personal situation, that it is in your best interests to sit down with an expert adviser.
A Spicers investment adviser will be able to help you understand the implications and the costs, and the impact such a move would have on your retirement lifestyle.
The content on this website is for information only. The information is of a general nature and does not constitute financial advice or other professional advice. Before taking any action, you should always seek financial advice or other professional advice relevant to your personal circumstances. While care has been taken to supply information on this website that is accurate, no entity or person gives any warranty of reliability or accuracy, or accepts any responsibility arising in any way including from any error or omission. A disclosure statement is available from your adviser on request and free of charge.
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