KiwiSaver opens doors for first home buyers

KiwiSaver launched 10 years ago to incentivise retirement savings. It has since also become a leg-up for those looking for funds to purchase their first home. Canstar reviews the use of KiwiSaver to help buy a first home.

In an election year, promises of making housing more affordable have been coming in thick and fast. At the time of publication, New Zealand is days away from finding out whether there will be a change in Government.

As it stands, making a KiwiSaver withdrawal to put towards a first-home deposit has been well-patronised.

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In June 2017, a total of $671 billion has been withdrawn for reasons other than retirement. And, while $70 billion has been withdrawn from KiwiSaver due to financial hardship, the lion’s share – $601 billion ­– has gone toward purchasing first homes.

Interestingly, over the 10 years, KiwiSaver withdrawals for these two reasons reveal two different general trends. There has been a steady increase in the number of people – and the amount of money – taken out for first homes, while there has been a decline in the use of KiwiSaver withdrawals for financial hardship.

In June 2012, just over 5000 KiwiSaver members withdrew for financial hardship. And about the same amount withdrew money for their first home.

But between June 2012 and June 2013, the number of hardship withdrawals started dropping off, while the number of KiwiSaver members withdrawing money for first home withdrawals spiked.

And, In June 2017 alone, about $60 million has been withdrawn for financial hardship, while 10 times as much ($600 million) has gone towards first home deposits.

annual number of fund withdrawals by reason kiwisaver

Source: KiwiSaver.govt.nz

annual amount of fund withdrawals by reason

Source: KiwiSaver.govt.nz

So, who is eligible to use a KiwiSaver withdrawal for first home?

who is eligibe to use a Kiwisaver withdrawal for first home

To use a KiwiSaver withdrawal for a first home, you must have been a KiwiSaver member for at least three years. There are a couple of other boxes to tick for KiwiSaver members to use their KiwiSaver savings towards a first home; you have to leave a minimum of $1000 in the account, and you also have to use the money towards a home you are going to live in, not an investment property.

The good news is, in April 2015, the rules changed to allow members to also withdraw their member tax credits for a first home withdrawal.

So, provided you meet the other criteria, you can withdraw the following for your first home purchase:

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

To withdraw the funds for a first home, you will have to apply to your KiwiSaver provider.

KiwiSaver withdrawal for a first home is not tied to income levels, or the price of the home.

KiwiSaver HomeStart grant – how does it work?

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 $3000 to $5000 per person ($6000 to $10,000 for a couple) to buy an existing home, and $6000 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 = $3000 (the minimum you can get)
  • 4 years of contributing = $4000
  • 5 years of contributing = $5000 (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 = $6000
    (the minimum you can get)
  • 4 years of contributing = $8000
  • 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 criteriato meet.

Applicants for a KiwiSaver Homestart Grant must also meet the following income and house price criteria:

  • If you’re buying the home on your own, your income can’t have exceeded $85,000 before tax, in the past 12 months.
  • If you are buying the house with someone else, your combined income is capped at $130,000 to be eligible.
  • You need to have a deposit of 10% or more of the house purchase price. The good news is, the 10% can include the money you receive from the grant. The deposit can also be gifted from a relative, with a gifting declaration.

This grant replaced the First Home Deposit Subsidy on 1 April 2015.

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How to boost your first-home prospects with KiwiSaver

how to boost your first home prospects with kiwisaver

Aside from the KiwiSaver first home grant up for grabs – and the ability to take out money towards a first home deposit – you can also boost your first-home buying prospects by reviewing your KiwiSaver fund.

In 2017, Canstar rated 16 providers, with a total of 19 KiwiSaver schemes and a combined total of 129 funds.

Canstar researchers discovered there are hundreds of dollars of savings to be made, by reviewing how much money you are paying in fees.

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