Kiwisaver & Mortgages

Using Kiwisaver to buy your first home is a tactic used by many recently to assist with the initial deposit. Confirming as soon as possible the amount you will be able to withdraw from your Kiwisaver is your advantage over other first home buyers. This will affect the amount you are able to borrow and has the potential to determine the quality of home you purchase. We’ll show you how to do that but it pays to know the facts. You should also get a mortgage ‘pre-approval’ which allows you to bid on homes or make an offer with the confidence your home loan will be approved by your bank without delays. iRefi can assist in getting pre-approvals and will help you pull together the right documents and information. To get pre-approval and use kiwiSaver before buying a property or obtaining finance you should know that the process can take up to 3-4 weeks and not having this sorted with settlement looming can be stressful. Getting things sorted early is the way to do it. iRefi can help you set this up but it’s worth reading through everything first. Taken from Housing NZ’s website:

 

‘KiwiSaver first-home deposit subsidy’

From 1 April 2015 the KiwiSaver first-home deposit subsidy has been replaced by the KiwiSaver HomeStart grant. The information below is only relevant to customers who have an existing approval/pre-approval/pending application submitted prior to 31 March 2015. Please note that if those clients want to apply for the KiwiSaver HomeStart grant from 1 April 2015, a new application form will need to be completed and submitted for consideration. The deposit subsidy 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)

You can buy a property with other people who may or may not also qualify for a deposit subsidy. KiwiSaver deposit subsidy house price cap criteria:

  • $550,000 – Auckland
  • $450,000 – Hamilton City, Tauranga City, Western Bay of Plenty District, Kapiti Coast District, Porirua City, Upper Hutt City, Hutt City, Wellington City, Nelson City, Tasman District, Waimakariri District, Christchurch City, Selwyn District, Queenstown Lakes District.
  • $350,000 – Rest of New Zealand

KiwiSaver HomeStart grant

How does the HomeStart grant work? After three years of regularly contributing to KiwiSaver (of at least the minimum allowable percentage of your total income) you may be entitled to the HomeStart grant. You can apply for the HomeStart grant or pre-approval if you have belonged and contributed to a KiwiSaver scheme, complying fund or exempt employer scheme for at least three years. 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 on, the HomeStart grant is $2,000 for each year of contribution to the scheme:

  • 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. A home which received its building code compliance certificate less than six months before Housing New Zealand receives a HomeStart application is considered a new home. The certificate must relate to the home as a whole and not only some building work on the home. Buying a vacant residential section and planning to relocate an existing/older house on the site does not constitute a new build property and will only be eligible for a HomeStart grant of between $3,000 – $5,000.

In cases of properties being bought off the plans, the HomeStart grant may be paid out prior to settlement to assist you with the initial payment or progress payment required as stated in the agreement you have entered into. In these cases, the grant must be held in trust, in escrow or similar arrangement, with payment to the developer only on settlement. Before signing any contract or agreement, you should always seek legal advice. If you are considering buying a property off the plans, it is highly recommended that you discuss this with your solicitor before signing the agreement.

You will also need to ensure that there is a projected completion date stipulated on the contract and that the developer is aware that the HomeStart grant is to be held in trust or in escrow until settlement date. Applications should be sent to Housing New Zealand no later than four weeks/ 20 working days before settlement or any earlier required payment date. If you are looking for your first home but haven’t yet found the right house, you can apply for pre-approval of your HomeStart application.

If you live in the house you have bought for a minimum of six months from settlement date or if you use the HomeStart grant to purchase land to build a house on, and live in that house for a minimum of six months from the issue of the code compliance certificate for that house, then the HomeStart grant does not need to be paid back. If you move out before the relevant six month period ends, you may be required to pay the HomeStart grant back, with interest.

You can also buy a property with other people, who may or may not be KiwiSaver members. If they are members, you may all qualify for HomeStart grants. However, no more than $10,000 worth of grants will be paid for the purchase of an existing/older property and no more than $20,000 for a new home or for the purchase of land on which a home will be built. You can only receive the HomeStart grant or its predecessor, the KiwiSaver deposit subsidy, once. Use this online calculator to estimate the HomeStart grant you could be entitled to.

How does the first-home withdrawal work?

If you’ve had KiwiSaver for at least 3 years, you may be able to withdraw all, or part, of your savings to put towards buying your first home. At least, $1,000 must remain in your KiwiSaver account. You must intend to live in the property. It cannot be used to buy an investment property.

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