Co-author: Michelle Norton
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.
You can read about the basics of the KiwiSaver HomeStart grant and first home withdrawal rules here. But, be prepared. 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 – 14 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. There are two options for how to withdraw from KiwiSaver for a first home. Each option has separate criteria and process.
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 can’t earn more than $85,000 a year for one person, or $130,000 for two or more people buying a home together. 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 maximum KiwiSaver first home grant per property is $10,000 for an existing property and $20,000 for a new home, no matter how many people are buying the property. This could affect groups of friends who plan to club together to get on the housing ladder.
6. The HomeStart grant is not your deposit
The HomeStart grant is paid on settlement – that means first home buyers will need to get the cash together another way for the initial deposit. Consider finding out how to withdraw from KiwiSaver to use towards the deposit, as this can be one way to get over the deposit hurdle.
7. You can’t use a KiwiSaver first home withdrawal for the initial deposit when buying at auction
One key point to be aware of when using a KiwiSaver first home withdrawal is that it can’t be used towards an initial deposit for a property bought 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. However, the rules of the KiwiSaver first home withdrawal state that you aren’t able to use these funds towards the initial deposit of a property bought at auction. Instead, any KiwiSaver first home funds can only be used towards the remainder of the price of the home, which is paid on settlement day.
How to withdraw from KiwiSaver for a new build
8. 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 $2,000 per year/per person grant towards the land, up to a maximum of $10,000 for five years for each member. Beware, however, that moving an existing or older house onto a different section of land doesn’t constitute a new build property and is therefore only eligible for the standard grant.
9. 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.
10. 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 $2,000 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
11. You may struggle to qualify in Auckland
Under the KiwiSaver HomeStart grant, there’s a price cap of $600,000 for an existing property and $650,000 for a new 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, at the time of writing:
|Region||Cap for existing/older properties||Cap for new properties|
|Auckland, Queenstown Lakes District||$600,000||$650,000|
|Hamilton City, Tauranga City, Western Bay of Plenty District, Kapiti Coast District, Porirua City, Upper Hutt City, Hutt City, Wellington City, Tasman District, Nelson City, Waimakariri District, Christchurch City, Selwyn District||$500,000||$550,000|
|Rest of New Zealand||$400,000||$500,000|
12. 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.
13. 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.
14. 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.