The Kāinga Ora Maintenance Clause (for First Home Loans)

Are you buying your first home with the Kāinga Ora low deposit First Home Loan scheme? If so, you need to know about the eligibility rules and the maintenance clause. Kāinga Ora requires that any maintenance on the property costs less than $10,000 to repair. You must also be able to afford those repairs, and finish them within 6 months of the purchase.

In many ways, it’s a sensible clause. Buyers with a low deposit usually can’t afford big repair bills. That is especially true in the first year or two of owning a home.

However, many people are unclear about what triggers this clause.

What Is The Kāinga Ora Maintenance Clause?

Many people believe that every home bought with a Kāinga Ora First Home Loan needs a building report.

Any issues in the report then need quotes, to show the repairs fit under the $10,000 cap.

Plus, those repairs need to be finished within 6 months of buying the home. Once they are done, you confirm this to the lender, who then tells Kāinga Ora.

You should expect this might happen. But we stress the word “might”, because it doesn’t always.

Understanding The Process

Generally, the process for buying with a Kāinga Ora First Home Loan looks like this:

• First, find a good mortgage adviser. You can message me, and I can help make sense of your mortgage.
• Next, your mortgage adviser gets you pre-approved before you go house hunting.
• The pre-approval probably won’t mention a building report.
• Even so, your adviser should warn you that you may need one.
• When you find a property, your adviser and the lender check the listing and the draft sale and purchase agreement.
• If you go ahead, the lender orders a valuation. Then your adviser and the lender review it.
• If the valuation raises any concerns, you will need a building report.
• If the building report finds repairs, you need quotes for them.
• The quotes must total less than $10,000. You also need to show you can afford the work.
• Finally, you finish the repairs within 6 months of settlement. You then send proof to the lender, who updates Kāinga Ora.

We say a building report “may” be needed because it depends on several things. These include the property, the clauses in your agreement, and anything the valuation picks up.

What Triggers a Building Report

It helps to know what the lenders and Kāinga Ora look at. So let’s step through it in more detail.

The listing. The home you want is most likely listed on a real estate website. The lender will almost certainly look at that listing for anything that might need repairs. If they spot something, they may ask for a building report.

The agreement. The standard sale and purchase agreement lets you make your offer conditional on a building report. In fact, many agents, lawyers and advisers say it’s wise to get one on any purchase. So it’s quite likely your agreement will include a building report clause.

When the lender sees that clause in your agreement, they will ask for a copy of the report. Of course, that assumes you are getting one, which isn’t always the case.

The valuation. A Kāinga Ora First Home Loan also needs a valuation. Banks usually ask for one when the deposit is under 20% or it’s a private sale. Since a First Home Loan is a low deposit loan, you will almost certainly need one.

When the lender gets the valuation, they look at more than the value. They also read the comments on the condition of the home. If anything raises a question about its condition, you will need a building report.

Sometimes the issue is small, and it would cost less to fix than the report itself. Even so, banks almost always ask for a report when they see a problem. We do push back if it’s very minor, or if the seller agrees to fix it before settlement.

In Summary

In short, you will need a building report if:

• the listing shows anything that concerns the lender, or
• your agreement has a building report clause, or
• the valuation raises anything the lender wants checked.

When you get the report, you also need quotes to fix any issues it finds.

You may be able to fix very small issues yourself. For anything significant, though, you will need a quote.

A good mortgage adviser will help you work through all of this. They will also be there to answer your questions.

It’s Best Working With An Experienced Mortgage Adviser

I arrange a lot of First Home Loans like this. So I explain all of this to you in advance.

Sadly, people who deal with the bank directly, or with an inexperienced adviser, often aren’t told.

Looking for an adviser to get your loan approved and handle the detail? I am well placed to help. Our team has a lot of experience with first home buyers. We also know which lenders offer Kāinga Ora First Home Loans. If you’re not eligible, we have other options too. These include low deposit loans from banks and non-banks, plus shared home ownership.

Most of all, when you deal with me, the advice is free.

If your loan is with a bank, the bank pays my commission. So it costs you nothing. And even if you’ve already spoken to your bank, you can still ask me for advice. That way, you know you have the best option, with no surprises along the way.

I’d love to help you get the keys to your first home.