KiwiSaver for a first Kiwi home

Putting together the money for a first home can be stressful and difficult, particularly in the current housing market. Fortunately quite a few of our first time home buyers find that they can use their KiwiSaver and/or the KiwiSaver HomeStart Grant to get them started.

Some people are surprised, though, that they’re not automatically entitled to their savings or the grant. It also sometimes harder to meet the criteria for HomeStart than they expect, and it can take quite a bit of time to complete the application processes.

So we thought it was worth while putting together some notes on the basic rules, to help you see whether this is an option for you.

The bottom line, though is check with a lawyer before you sign anything. We’re always happy to help if you need us.

Kiwisaver First Home Withdrawal (your private savings)
The KiwiSaver Scheme is a private retirement fund that most of us are signed up to. Generally, you can’t access it until you retire, but there are some limited situations in which you can get all or part of your contributions earlier.

One of those situations is to buy your first home, or a section on which to build it.

As with all these things, though, there are conditions:
• You must intend to use it for your main home.
• You need to have been contributing to KiwiSaver for at least three years.
• You need to fit with any specific requirements of your KiwiSaver scheme provider.

Each KiwiSaver provider may require slightly different things. Some providers will give you full pre approval to withdraw your funds before you have an agreement to purchase a property or land. Others, however, do not want to hear from you until after there is an unconditional agreement and have no pre approval process.

You should always try to get pre approval if possible. At the very least you should get an email from your provider advising how much is available for a first home withdrawal. This lets you see what you might be able to afford, and gives a good basis to talk to your bank about how to finance the rest of the purchase price.

So read the eligibility criteria that you receive from your KiwiSaver provider carefully. If you need help with this, just give us a call.

Don’t leave your application till the last minute, otherwise you could find yourself missing out on your house. Providers can take up to 10 working days from receiving the original application and supporting documents to process your withdrawal. Some can take up to 15 working days.

KiwiSaver HomeStart Grant
KiwiSaver HomeStart is effectively a gift from the government to help first time buyers.

Again, there are conditions – and they can be relatively tough to meet, particularly the price cap. If you do meet those conditions, though, you can probably also withdraw your KiwiSaver money to give you some further help.

Conditions include:
• You have to live in the property as your main home for at least 6 months after settlement.
• You must have been a member of a KiwiSaver scheme, been providing the minimum percentage of your income to the scheme for at least three years.
• You must meet the other criteria such as not exceeding the income cap or purchase price cap.

The amount that you can get depends on how long you have been contributing to a KiwiSaver scheme and what kind of property you are buying. To check out the criteria, see Housing NZ’s information Ways we can help you to own a home

For instance, the purchase price cap varies from region to region. In Wellington it’s only $500,000, which sounds like a lot but in practice can make it pretty difficult to find a place.

Again, it’s best to get your grant pre-approved before you have signed an agreement to buy a property. You’ll get a letter confirming how much they will give you, and a sheet to fill out the property details when you find something. The pre-approval lasts for 6 months.

As part of your application, you’ll need to prove that you can pay 10% of the purchase price from your own funds. This can include your private KiwiSaver and the HomeStart Grant (and your partner’s if you are purchasing with another person).

Allowing enough time for the paperwork to go through is important here too.
• It can take up to 20 working days for your pre-approval application to be processed, so get onto it as soon as you know you’ll be house hunting.
• Once you have pre-approval, it still takes up to 10 working days after you decide on your property to process your application and issue the final grant.
• The grant agreement has to be returned to the Housing New Zealand HomeStart team 5 working days before settlement.

Second Chance KiwiSaver Withdrawal and KiwiSaver HomeStart Grant
If you have previously owned a property, but do not currently own a property, you may still be able to use your KiwiSaver and/or the HomeStart Grant to buy your next home.

However, you won’t be eligible if you’ve already withdrawn KiwiSaver funds or received a HomeStart grant. You’ll also need to apply to Housing New Zealand Corporation for a letter confirming your eligibility before you can apply to KiwiSaver and/or HomeStart.

Clear information about the criteria and the application form are available here: Features for previous home owners

Company share apartments? Forget it
KiwiSaver and HomeStart can’t be used to buy company share apartments as the land is owned by a company, not by you personally.

It’s all got to be sorted by settlement date
If you have already paid for a property, that’s it. You can’t retrospectively withdraw your KiwiSaver or use HomeStart. Both funds can only be used when you are paying for the property on the settlement date, not afterwards.

That is why the dates in the sale and purchase agreement are so important. Don’t let an eager real estate agent pressure you into short time frames without checking with us first!

Image credit: Buller’s Kiwis, Wikimedia Commons