How to use KiwiSaver to Buy Your First Home

If you’re staring at the walls of your flat, wishing you were staring at the walls of your very own home, it might be time to consider your funding options. A popular option among young New Zealanders is a KiwiSaver scheme.

That’s right, KiwiSaver schemes are not just a way to plan for your retirement, a KiwiSaver withdrawal could help you on your way to your first humble abode.  If you’ve been in a KiwiSaver arrangement for three to five years, you can reap the rewards and use the savings towards a deposit for your first home.

Source: Kiwibank NZ

What is KiwiSaver and how does it work?

KiwiSaver is the retirement savings scheme in New Zealand, introduced by the Government in July 2007. By July 2015, the KiwiSaver scheme was so popular it already had 2.53 million members. Kiwisaver members build up their savings through regular contributions from their before-tax pay, from their employer, and from the Government. Kiwisaver schemes are voluntary to join.

There are two extra advantages in KiwiSaver schemes that any First Home Buyers should know about:

KiwiSaver HomeStart Grant: First Home Buyers may qualify for a Housing New Zealand HomeStart Grant if they have been regularly contributing to KiwiSaver for at least three years. The grant provides from $3,000 to $5,000 per person ($6,000 to $10,000 for a couple) to buy an existing home, and $6,000 to $10,000 per person ($12,000 to $20,000 for a couple) to buy a new home or land to build a new home.

If you are purchasing an existing/older home, the HomeStart grant is $1,000 for each year of contribution to the scheme:

  • 3 years of contributing = $3,000 (the minimum you can get)
  • 4 years of contributing = $4,000
  • 5 years of contributing = $5,000 (the maximum you can get).

If you are purchasing a new home, a property bought off the plans, or land to build a new home, the Homestart Grant is $2000 for each year of contribution to the scheme. A home which received its building code compliance certificate fewer than six months before Housing New Zealand receives a KiwiSaver HomeStart grant application is considered a new home. Homestart Grant is broken down as:

  • 3 years of contributing = $6,000
    (the minimum you can get)
  • 4 years of contributing = $8,000
  • 5 years of contributing = $10,000
    (the maximum you can get)If you are purchasing land to build a new home on, there is a maximum amount the combined land and new home can cost. There are other eligibility criteria to meet.

This Grant replaced the First Home Deposit Subsidy on 1 April 2015. Read more about the KiwiSaver HomeStart Grant on the Housing New Zealand website.

KiwiSaver withdrawl for a house deposit: First home buyers who don’t qualify for the subsidy can still withdraw both their own and their employer’s KiwiSaver contributions regardless of their income. They just can’t withdraw the $1,000 kick-start.

As of 1 April 2015, First Home Buyers’ withdrawals from KiwiSaver can include:

  • your member contributions
  • any employer contributions (voluntary and compulsory)
  • any returns on investment(s) received
  • any member tax credits.

Prior to 1 April 2015, KiwiSaver members were unable to withdraw their Member Tax Credits when purchasing their home.

The Government makes an annual contribution towards your KiwiSaver account, known as a member tax credit, as long as you are a contributing member aged 18 or over. Member Tax Credits stop when the KiwiSaver scheme member reaches the age of eligibility for superannuation, currently 65 in New Zealand. The Government provides further guidance on Member Tax Credits.

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Four Things to Consider with Your First Home
Location City of Hamilton For your first home, you might have to consider buying outside main cities likes Auckland.
Flatmates Housemates Getting flatmates in could help you pay off your mortgage faster
Garden (if you have one!) Gardening If you choose a place with a garden, let’s hope you have a green thumb!
Work commute Commuting to Work Consider the location of your home in comparison to your workplace. Are you prepared for a long commute?

How do I make a KiwiSaver withdrawal?

To make a KiwiSaver withdrawal, you’ll need to apply to your KiwiSaver provider. However, remember a Kiwisaver withdrawl for a home deposit is only available for First Home Buyers and not those looking to buy an investment property. The details for this scheme can be found in the KiwiSaver guide to buying your first home.

First Home Buyers can maximise their chances

First Home Buyers who can take advantage of one or both of these schemes could have a ready-made deposit for their first property. If, for example, a couple withdraws $10,000 of their own savings from KiwiSaver and qualifies for a $10,000 subsidy, that’s enough for a 10% deposit on a $200,000 starter home or an apartment. However, given the current state of property in New Zealand, you will have to be realistic about which regions you would be able to buy in. So, sorry Aucklanders, that might mean considering the regions!

What other schemes are available to First Home Buyers?

Other schemes available to first home buyers include various Government grants and subsidies. The government’s Welcome Home Loan, for example, allows qualifying first time home buyers to buy property without a deposit. Despite its name, the Welcome Home Loan isn’t a loan or mortgage, but a guarantee from the government that allows first home buyers to borrow up to $200,000 with no deposit or $350,000 with a 15% deposit. Three or more friends or whÄnau members can team up together to buy a home. There are of course conditions, which can be found at the Welcome Home Loan website.

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