Q I have been saving for my first home for the past 10 years. I now realise that I can't do this on my own, I will need help with the mortgage repayments. Can I make a first home withdrawal from my KiwiSaver for a home that I will share with others? I will need at least two flatmates to make ends meet. Do I need 20 per cent for a deposit or less than that?
A There are certain requirements for a person making a first home withdrawal. You must declare that the property is intended to be your principal place of residence, and live in it for at least six months.
It can't be an investment property or holiday home. However, you can share it with others as tenants or boarders. You can also buy it jointly with one or more people.
Buying a property is usually the largest financial decision a person will ever make. It is also something we don't do very often, so a helping hand along the way is invaluable.
A mortgage broker will be able to help you with your decisions — starting early in the process. Their help is free to you, as they are paid a commission by the lending institution that you eventually borrow from. They usually deal with a range of lenders and will help you shop around to find the best deal.
Mortgage brokers must be registered as financial service providers and are required by law to follow a code of professional conduct. This includes treating clients fairly, acting with integrity and giving suitable advice that is properly understood.
They can advise on every stage of the process, including giving you an idea of your borrowing capacity and positioning your application in the best possible way. This even extends to giving advice on your spending in the months leading up to a mortgage application.
Banks require three months' worth of statements and will scrutinise your statements for evidence of good money management.
Banks will happily lend up to 80 per cent but if you have a good income you may be able to borrow more. However, the borrowing costs in this case are usually higher.
A first home loan (underwritten by Kāinga Ora) is designed to make it a bit easier to get into your first home. It allows first home buyers to buy with as little as a 5 per cent deposit, as long as they meet certain criteria.
Eligibility is similar to the first home grant (which pays up to $5000 for an existing home to eligible borrowers) and includes an income cap of $95,000 for one person or $150,000 for two or more people.
The house must be within the price cap for your region — currently this is $625,000 in Auckland, $550,000 in Wellington and $400,000 in Hawke's Bay. Price caps for other regions can be found on the Kāinga Ora website. These price caps were increased on April 1, 2021 but the price of houses has outstripped expectations and for a while buyers have struggled to find houses for sale in those price brackets.
Rising interest rates may help to bring prices back down, along with other government interventions.
In your KiwiSaver first home withdrawal application you must declare that you haven't made a first home withdrawal from a KiwiSaver scheme before and that you have been a member for at least three years.
You must leave $1000 in your account, as well as any amount transferred from an Australian complying superannuation scheme. You must also declare that you haven't "held an estate in land before". If you have, check with Kāinga Ora as you may be eligible for a second chance withdrawal.
- •Shelley Hanna is the communications manager with Peak Portfolio Management Ltd which is a Financial Advice Provider licensed by the Financial Markets Authority. Disclosure information is available at www.peak.net.nz or call 06 8703838. The information provided in this article is of a general nature and should not be relied on as a recommendation to invest in a financial product. Send your KiwiSaver questions to firstname.lastname@example.org