Pip Maxwell

PHOTO: Pip Maxwell, Kiwibank’s senior product manager. SUPPLIED

Gathering an adequate deposit can pose a significant obstacle to achieving homeownership, leading many New Zealanders to turn to the “bank of mum and dad” for financial assistance. Recognizing that this isn’t always a viable option, Kiwibank has introduced a product designed to expedite the process of stepping onto the property ladder.

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Named “Co-own,” this initiative enables individuals to combine their savings with friends and family to reach their deposit target, thereby co-owning a property together. According to data from CoreLogic NZ for the second quarter of 2023, the nationwide average time required to save a 20% deposit is 9.6 years. While this figure has decreased from the peak of 11.7 years in the first quarter, it remains higher than the eight-year average. This calculation assumes that homebuyers can save 15% of their gross income, based on an income of $126,805.

Pip Maxwell, Kiwibank’s senior product manager, emphasized that Co-own continues to serve as a pathway to assist New Zealanders in achieving homeownership. “Not everyone aspiring to become a homeowner has the luxury of parental support in purchasing property, so joining forces with close friends or family could provide a solution,” Maxwell stated.

The Co-own product allows up to four individuals, such as friends, family members, or two couples, to pool their savings, generally aiming for a combined deposit of 20%. Each co-owner is individually and jointly responsible for the home loan. KiwiSaver members can also utilize their KiwiSaver savings towards their share of the deposit, provided they meet the first home withdrawal criteria.

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In addition to combining savings, Co-own offers the opportunity for co-owners to share property-related expenses, such as maintenance, rates, and insurance. This collaborative approach potentially allows customers to enter the property market earlier and acquire the home they desire.

Kiwibank emphasizes the importance of carefully choosing co-owners, recommending that individuals seek professional advice when entering into such agreements. Decisions regarding aspects like bringing in a flatmate to help with mortgage payments should be agreed upon and discussed upfront.

Typically, Co-own arrangements involve a joint home loan structure where all co-owners are borrowers, each being liable for the entire home loan. This means that if one co-owner cannot meet their share of the loan repayments, the others must cover the deficit. To protect the credit ratings of all co-owners, Kiwibank advises having a property sharing agreement in place before purchasing the property. This agreement delineates the rights and responsibilities of each co-owner, helping to ensure alignment and agreement while potentially uncovering any issues early in the process.

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There are no specific restrictions on the length of time co-owners must hold the property, and each home loan is subject to Kiwibank’s prevailing special and standard interest rates.

Mortgage advisers working with clients interested in Co-own are encouraged to engage in early conversations to prevent misunderstandings. These discussions can encompass setting clear expectations, exploring long-term goals, understanding the reasons for purchasing property with others, determining each person’s contribution toward the deposit, and assessing affordability regarding repayments. Additionally, advisers should address potential scenarios, such as job loss, one co-owner wanting to sell before others, and unforeseen costs like property maintenance.

Pip Maxwell advised advisers to emphasize the importance of working through these details early in the process to ensure alignment among co-owners when it comes to establishing a property sharing agreement with the assistance of lawyers.

Mortgage advisers interested in learning more about Co-own for their clients can visit the Kiwibank website and reach out to their Business Development Manager (BDM).