If you have not owned a house or land before, KiwiSaver is a way to save to help buy your first home.  If you have owned a house before but do not now, and are in a similar financial position as a “first home buyer”, KiwiSaver may also be able to help you as a “previous home owner”.

This article looks at the KiwiSaver rules for taking money out of your KiwiSaver Account, to help you buy your first home (known as a first home withdrawal).  The article also looks at the additional and separate government HomeStart Grant (previously known as KiwiSaver first home subsidy).  Both the first home withdrawal and the HomeStart Grant have separate rules and are administered by different organisations.  Both can help you secure a home.

 

First home withdrawal – accessing your KiwiSaver money

If you have not owned land or a house before, by yourself or with someone else, you may qualify to take money out of KiwiSaver when you buy your first home.  The home must be in New Zealand.

If you have owned a house before, you may still qualify, if Housing New Zealand considers that your financial situation (in terms of your income, assets and liabilities) is the same as what would be expected for a person who has not owned a home.  In this case, you need Housing New Zealand to certify this.  Housing New Zealand’s contact details are at the end of the article. 

There are some rules:

  • To be eligible to make a first home withdrawal form your KiwiSaver Account, you must have not made a withdrawal; from  KiwiSaver for this purpose before, and:
  • You need to have been a member of a KiwiSaver scheme or a complying superannuation fund for at least 3 years (note, the 3 years is the membership period and not the savings period), and
  • You must be buying the house in New Zealand, and
  • The house you are purchasing must be intended to be your principal place of residence.

You can withdraw for the purchase of an interest in a dwelling house on Maori land that is intended to be the principal place of residence for you or for you and your family, if evidence of the right to occupy Maori land is provided. 

From 1 June 2015 you can use the first home withdrawal to make payments as part of the purchase price, including deposit payments, before the agreement for sale and purchase is unconditional, but has to be refunded to your KiwiSaver Account if the sale does not proceed.  

Three years’ membership is a specific requirement.  Where you were auto enrolled in KiwiSaver and did not make a specific decision to join a KiwiSaver scheme, the start of the 3-year period applies from the 15th of the month your contributions were first deducted from your pay.  In other cases, it is when you first joined a KiwiSaver scheme.

Under the first home withdrawal provisions, you can take out more than the money you personally saved.  If you are eligible to make a withdrawal, you can withdraw everything in your KiwiSaver Account except $1,000 must remain in your KiwiSaver Account. 

This means you can withdraw all of your savings, the contributions by your employer, the annual member tax credits (MTCs) and all of the investment earnings in your KiwiSaver Account. If you do not withdraw the maximum amount available, what you do withdraw first comes from your contributions, then your employer contributions followed by your annual MTCs.  Being able to access the employer contributions and MTCs is a significant boost to the money available to help buy your first home. 

As part of the process to taking out money, you need to provide details of any period you were resident outside New Zealand.  If MTCs were received during these periods they have to be paid back to the government.

It is important to note that the amount you take out of KiwiSaver is not paid to you, but to your solicitor’s trust account.  To take the money out, your solicitor will have to provide a copy of the sale & purchase agreement and give an undertaking that the money will be paid to the seller of the house.  If the purchase does not go ahead for any reason, the money must be refunded by your solicitor to your KiwiSaver Account.

Separate to the first home withdrawal is the HomeStart Grant.

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HomeStart Grant

If you are eligible for the first home withdrawal under KiwiSaver, you may also be eligible for the HomeStart Grant from the government.  The HomeStart Grant is separate from the first home withdrawal payment.  It is managed by Housing New Zealand and not your KiwiSaver provider.  

To qualify, you must have been saving in a KiwiSaver scheme, or a complying superannuation fund, or exempt employer scheme for at least 3 years’ and your savings must have been at least 3%[1] of your taxable pay.  For non-working people, the savings have to have been at least 3%1 of the minimum wage (about $510 savings a year).  Couples can both qualify jointly.  In fact, up to three people can apply for a HomeStart Grant for the joint purchase of a house.

To purchase an existing house the HomeStart Grant is $1,000 for each year you have saved in a KiwiSaver scheme, or a complying superannuation scheme, or exempt employer scheme, with a maximum of $5,000.  For the purchase of a new home, the HomeStart Grant is $2,000 for each year you have saved in a KiwiSaver scheme, or a complying superannuation scheme, or exempt employer scheme, with a maximum of $10,000.  The maximum applies after 5 or more years’ savings.  The 5-years’ saving do not need to be consecutive.  Where two people apply together, both can qualify for the maximum.

There are some rules.  You must be 18 or older and:

  • You must have a deposit, which can include your KiwiSaver balance, equal to 10% of the value of the house you are buying.
  • Until 1 July 2016, your household income must be below the maximum household income limit i.e. $85,000 or less (before tax) for an individual person in the last 12 months, $130,000 or less (before tax) in the last 12 months if 2 or more people are buying the home. From 1 July 2016 the maximum income test is removed.
  • The value of the house must be below the house price cap:
  • $600,000 in Auckland,
  • $500,000 for Christchurch City, Hamilton City, Hutt City, Upper Hutt, Kapiti Coast, Porirua City, Queenstown Lakes District, Selwyn District, Tasman/Nelson, Tauranga City, Thames/Coromandel, Waimakariri, Western Bay of Plenty and Wellington City, and
  • $400,000 for the rest of New Zealand.
  • If you are buying land to build a house, or buying an apartment not yet built, the house/apartment must be built within the timeframes stated in the building contract.  You also need to be able to show the availability of the necessary funding required to build the house/apartment.

Remember, applications for the HomeStart Grant are processed by Housing New Zealand.  It is possible to get “pre-approved” of your eligibility, if this is necessary to help secure a mortgage.  Contact details of Housing New Zealand are:

Phone: 0508 935 266
Web: www.hnzc.co.nz/kiwisaver

Postal address:

 

 

 

National Office, Auckland

Private Bag 76913

Manukau

Auckland 2241

 

 

 

 

 

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Using KiwiSaver to buy your first home

If you are thinking that you might use KiwiSaver to help buy your first home, you should get appropriate advice, for your circumstances.  Also, think about:

  • joining KiwiSaver as soon as you can;
  • saving as much as you can afford to;
  • ensuring that in the year you make the withdrawal, you have saved the $1,043 for that year as you can put in an amount before the purchase and then take it out as part of the first home withdrawal.  This ensures that you maximise your annual member tax credit for that year. 

If you have children, think about joining them up early to get them through the minimum three-year membership period.


[1] 4% prior to 1 April 2009.  2% between 1 April 2009 and 1 April 2013.