House hunting is stressful enough, without finding out you missed a step toward KiwiSaver first home withdrawal approval, or that you don’t make the cut for a KiwiSaver first home grant.
To avoid a nasty surprise at the last moment, there are a number of things you need to know about the KiwiSaver first home process.
KiwiSaver first home withdrawal process & HomeStart grant – 13 pointers
1. You must be a first home buyer
You must be a first home buyer and, if you’re buying as a couple, your partner has to be, too. If you are in any doubt about this, talk to your solicitor. You don’t want to discover only one of you is eligible.
Second time buyers can sometimes qualify if they can prove they are in the same financial position as a first time buyer, due to having gone through a divorce or other difficult financial circumstances. But you can only receive a KiwiSaver first home grant once.
2. Know the difference between the grant and the withdrawal
Understand the difference between a KiwiSaver first home grant, known as the HomeStart grant, and a first home withdrawal.
Most first home buyers will qualify to make a KiwiSaver withdrawal to put towards a home. Fewer people tick all the boxes for a KiwiSaver HomeStart grant.
3. You must have contributed consistently for at least three years to be eligible for a HomeStart grant
To qualify for a HomeStart grant, you must have contributed consistently for at least three years. If you’re not working and contributing to KiwiSaver for a period of months or years, that time will be deducted from your KiwiSaver first home grant eligibility.
Don’t assume that just because you’ve been making contributions, you’ve actually contributed the minimum each year. Check and double check!
Check the fine print with a KiwiSaver first home grant
4. No “high income” earners allowed
To qualify for a HomeStart grant, you must have earned less than the income caps in the last year. Each cap is before tax. These caps are:
- $95,000 or less for an individual
- $150,000 or less for an individual buyer with one or more dependents
- $150,000 or less for two or more buyers, regardless of dependents
The catch 22: if you’re buying in one of the main centres, this level of income may not be high enough to buy much in the way of a home.
5. You can’t get more money for buying with more mates
If you buy with three or more people, you can’t triple or quadruple your HomeStart grant. The typical maximum KiwiSaver first home grant per property is $5000 for an existing property and $10,000 for a new home. However, if you’re building or buying a new home with someone else, and they’re eligible, you may be able to get up to $20,000. Bear in mind, the discount caps at two people receiving the discount. This could affect groups of friends who plan to club together to get on the housing ladder.
6. You can’t use a KiwiSaver first home withdrawal for the initial deposit when buying at auction
When you buy a house at auction, you have to pay a deposit immediately. This is generally 10%, however, it is possible for the buyer to specify an amount different to this prior to the auction. Likewise, the seller may specify a different deposit amount requirement.
You cannot withdraw Kiwisaver first home funds in advance when buying a property at auction. However, you can use your Kiwisaver funds for the deposit post-auction. You’ll need to ask the real estate agent to seek a variation to the auction conditions to do this.
How to withdraw from KiwiSaver for a new build
7. You can’t use a HomeStart grant to build a home
You need to put the KiwiSaver first home grant towards the land. This won’t be a problem if you’re buying a house and land package. Sometimes, however, KiwiSavers buy the land first and assume they can use their grant towards the subsequent build.
The good news is, if you’re buying land to build a new home, you qualify for the chunkier $2000 ($1000 for each year you’ve been a Kiwisaver members – up to two years) per grant towards the land, up to a maximum of $10,000 ($2000 for each year you’ve been a Kiwisaver member – up to 5 years).
8. New homes must have a projected completion date
If you’re buying properties off the plan, you can use your HomeStart money for the progress payments. But you must have a projected completion date stipulated in the contract. The grant will be held in trust or escrow until settlement date, which can cause problems.
9. Your new home must be less than six months old
If you’re buying a home and land package, Housing New Zealand, which manages the HomeStart grant, says that a home must have received its building code compliance certificate less than six months before the grant application if you want the $2000 per year of KiwiSaver membership grant. What’s more, the certificate must relate to the whole home and not some building work on the home.
KiwiSaver first home grant hurdles for city slickers
10. You may struggle to qualify in Auckland
In Auckland, under the KiwiSaver HomeStart grant, there’s a price cap of $875k for a new or existing property, which makes it nigh impossible to find a home in a central location in Auckland, unless you’re willing to buy an apartment.
Here are the HomeStart grant house price caps, by region:
House price caps
|Region||Existing/older properties||New properties|
|Tauranga, Western Bay of Plenty||$800,000||$875,000|
|Kāpiti Coast, Porirua City, Upper Hutt City, Hutt City, Wellington City||$750,000||$925,000|
|Hamilton City, Waipa, Waikato||$650,000||$775,000|
|Palmerston North City||$575,000||$700,000|
|Central Hawke’s Bay||$500,000||$650,000|
|Far North District||$400,000||$675,000|
|Rest of New Zealand||$400,000||$650,000|
Figures correct as of 12/07/23.
11. Give notice
If you don’t apply for the HomeStart grant at least four weeks (20 working days) before settlement, you may be too late to qualify. This has caught out some home buyers who applied at the time of settlement, to find that they received nothing.
The home loan pre-approval process, also known as conditional approval or approval in principle, is when your bank conditionally approves or denies you for a loan before you apply to buy a house.
The bank or other lender checks your finances and assesses whether you’ll be able to successfully repay a loan. Make sure you have a look at the rates and home loan features providers are offering before approaching lenders. Canstar’s free home loan comparison tools (access them via the button below) are there to help you make a shortlist of providers and products.
In the case of a KiwiSaver first home withdrawal, you should apply to your KiwiSaver provider, not Housing New Zealand. Contact your KiwiSaver provider as soon as you sign a sale and purchase agreement. Your provider will pay the funds into your solicitor’s trust account.
12. You must live in the house for six months
Don’t be clever and think you can buy a rental investment property or bach with your KiwiSaver first home grant or withdrawal. You’ll need to live in the home for six months before you can rent it out. The HomeStart grant needs to be paid back with interest if you move out within six months. However, there has been some debate about whether first home buyers should be allowed to withdraw their KiwiSaver funds for an investment property, so watch this space.
Finally, if you’re buying your first home, we recommend you find yourself a lawyer early in the process to avoid any of the pitfalls mentioned above.
13. Review your KiwiSaver provider, scheme and fund type
Regardless of whether you are using your KiwiSaver savings towards retirement or a first home, it’s encouraged that you regularly review your investment to see how it’s performing and whether it’s still working for you. If you plan to withdraw your funds within the next couple of years, you may find that a more conservative fund type will work for you. That’s because conservative fund types by nature fluctuate less, so you are likely to have a better idea of the funds that will be available for you to put towards a first home. While Canstar can’t give you personalised financial advice, we can help you compare your options, so you can get a clearer idea of whether your investment is working for you. To see how KiwiSaver providers compare in the market, just hit the button below to use our free comparison tools.
This report was written by Canstar Content Producer, Caitlin Bingham. Caitlin is an experienced writer whose passion for creativity led her to study communication and journalism. She began her career freelancing as a content writer, before joining the Canstar team.
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