Case Study
See the table below on how Tanya and Stephen use Gateway to get into their first home.
| Timeline | Finances |
|---|---|
|
Year One Tanya and Stephen are using Gateway to build their first home on gateway land that’s become available in the Hawkes Bay. Their Gateway housing assistance will be for 10 years with Housing New Zealand, and covers the cost of the land of $120,000. Each year, 3% of the $120,000 (which is $3,600) is added to their Gateway amount. So after the first year the balance will be $123,600 and by year 10 it will be $156,000. The cost to build the house is $250,000 and they’ve contributed the 10% deposit of $25,000 and taken out a construction loan with a bank for the rest. They’ll make regular payments each fortnight to their bank to pay this off. |
$120,000 Starting balance + $3,600 (3% no payment required) = $123,600 Gateway balance at end of year one At the end of year 5 balance will be $138,000 |
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Year Six At the beginning of year six, regular interest payments on the Gateway housing assistance will start. This is additional to the yearly $3,600 amount that gets added each year, and is set at 1% (for the year) on the original $120,000. This works out at approximately $46 per fortnight and is paid to Housing New Zealand. The amount of $3,600 will continue to be added to their Gateway balance. They also continue to pay their fortnightly construction loan repayments to their bank. |
$138,000 Balance at start of year six + $3,600 (3% no payment required) = $141,600 Gateway balance at end of year six Interest payments (1%) of $46 to pay fortnightly (Gateway interest of 1%) |
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Year Eight In year eight of Gateway, the Gateway interest rate payment will increase to 3% (of the original $120,000). So Tanya and Stephen now need to increase their fortnightly payments to Housing New Zealand from $46 to $140. Again in the background, the original yearly amount of $3,600 will continue to be added to their Gateway amount. They'll also continue to pay their regular fortnightly home loan repayments to their bank as they have always done. |
$145,200 Balance at start of year eight + $3,600 (3% no payment required) = $148,800 Gateway balance at end of year eight Interest payments at 3% of $140 to pay fortnightly |
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Year 10 At the start of year 10 the Gateway interest payment increases for the last time to 5% (of the original Gateway amount of $120,000). This works out to be $230 per fortnight, which Tanya and Stephen will pay to Housing New Zealand. Their fortnightly home loan payments to their bank continue as normal, and the last yearly amount of $3,600 will be added to their Gateway amount. |
$152,400 Balance at the start of year 10 + $3,600 (3% no payment required) = $156,000 Gateway balance Interest payments at 5% of $230 to pay fortnightly |
| End of Year 10 and Gateway
At the end of year 10, Gateway ends. The Gateway balance for Tanya and Stephen will be $156,000 due to the yearly $3,600 additions. The bank loan for building the house has reduced to $180,000 from their fortnightly bank repayments. Tanya and Stephen now have to discuss refinancing their bank construction loan with their bank and adding the remaining Gateway amount to it. This would involve taking the $156,000 Gateway amount and adding it to the $180,000 loan with their bank. So this will form one home loan with their bank of $336,000. This new home loan will be with their home loan bank and will now cover both the land and building costs. Tanya and Stephen will pay this off fortnightly in the same way they paid off their original home loan with the bank. |
Gateway = $156,000 final balance Refinance with bank: $156,000 Gateway $180,000 construction loan with bank = $336,000 new home loan |
Gateway sells Crown and Housing New Zealand Corporation owned land to first-home buyers. The land is sold with payments deferred for up to 10 years.
