Q: Is buying off a plan and putting a 10 per cent deposit on it considered an "estate in land"? If that's the case, we are very worried we might not be able to make a KiwiSaver first-home withdrawal - upon which our bank's pre-approval is based. Is there a price cap for a first-home withdrawal?
A: There's nothing like a bit of legal jargon to trip you up and the KiwiSaver first-home withdrawal rules have plenty of it.
Terms such as a fee simple estate, a leasehold estate and a stratum estate are hardly the stuff of everyday conversation.
Lawyer Therese Singleton, AMP's general manager of insurance and investments, says an estate in land includes bare land (upon which to build) or a land and building.
"A KiwiSaver first-home withdrawal can be used to purchase either," she says.
"So long as you meet the first-home withdrawal criteria, you can apply for a first-home withdrawal even after paying a deposit, as you do not own the property.
"You can also apply for a first-home withdrawal even after the sale-and-purchase agreement goes unconditional, whereby the funds will be paid to the seller as part of the purchase price on the date of settlement." You cannot, however apply for a first-home withdrawal after settlement, when you own the property.
Funds from your KiwiSaver account are paid directly by your provider to your lawyer's trust account to settle the property purchase. If the property purchase falls through, the money will be refunded into your KiwiSaver account.
Singleton confirmed there are no house-price caps on the property for a first-home withdrawal.
So as long as you meet all the first-home withdrawal criteria, what you spend is between you and the bank.
The house-price caps and salary caps kick in if you are wanting extra support from the HomeStart grant administered by Housing New Zealand.
It can be up to $10,000 towards owning your own home.
An individual who has consistently saved into KiwiSaver could be eligible for $3000-$5000 in support, and couples can claim $6000-$10,000. Those figures double if you're buying a yet-to-be or newly built property. Both caps were adjusted this month to take into account rising house prices. The income cap limits have risen to $85,000 and $130,000 (before tax) respectively, based on income for the previous 12 months.
House caps have risen $50,000 for existing homes and $100,000 for new homes.
• For more details go to: hnzc.co.nz/ways-we-can-help-you-to-own-a-home/kiwisaver-homestart-grant-and-savings-withdrawal/