KiwiSaver: First-home grant could get you in the door

To qualify for the $10,000 HomeStart grant, the house you are buying needs to be brand new or have a code compliance certificate of six months or less, says Housing NZ. Photo / File

Q: I am a single guy looking to use my KiwiSaver to buy my first home. I have been a member for seven years and my annual salary is about $70,000 gross. My KiwiSaver is worth $64,000 and I am looking at buying for $310,000. Is it correct that the Government will give me an additional $10,000 for my first home? I also have about $7,000 personal savings. I have been putting in 8 per cent each week and my company gives me 4 per cent each week for my KiwiSaver.

A: First, congratulations - you've done well to save $64,000 in KiwiSaver. The average KiwiSaver balance is a little over $10,000. Many people don't contribute.

By making regular savings, you will no doubt be getting the maximum member tax credit from the Government. The credit is an annual cash payment as a reward for contributing. Available to any KiwiSaver between 18 and the age of access eligibility, generally 65, it's worth up to $521.

To get the maximum payment, you need to have put $1,042 into KiwiSaver between July 1 and June 30 each year, $20 a week.

The cut-off for that payment is looming, so if you have fallen short get in touch with your KiwiSaver provider.

According to ANZ, only 56 per cent of possible tax credits were paid out last year.

"We estimate last year KiwiSaver members missed out on $400 million that could have been claimed if they had contributed the minimum amount," said ANZ Wealth managing director John Body. In April, it became possible to withdraw the member tax credits alongside any contributions you or your employer have made and any investment returns. Only the last $1,000 needs to stay, so on a balance of $64,000 you could take out up to $63,000.

Your provider deals with the paperwork around first home withdrawals from KiwiSaver.

Because you earn under $80,000 a year it looks like you're eligible for help through the HomeStart grant (formerly known as the KiwiSaver first home deposit subsidy). It is administered by Housing New Zealand, so I put your question to them:

"Qualification for the new KiwiSaver HomeStart grant is the same as applying for the KiwiSaver deposit subsidy. It is not enough to have just been a member of KiwiSaver, but that you have contributed the minimum percentage of your income for at least three years.

"If you have regularly contributed 8 per cent of your total income for seven years, you could qualify for the maximum grant available. You need to make an application for an approval/pre-approval to Housing New Zealand.

"To qualify for the $10,000 HomeStart grant, the house you are buying needs to be brand new or have a code compliance certificate of six months or less.

"For an older/existing property then the maximum grant available to you would be $5,000.

"Along with your application and supporting documents, including a signed copy of the agreement for sale and purchase, you will need to provide evidence of a deposit of at least 10 per cent of the purchase price.

"You will require an email/letter from your KiwiSaver provider confirming the amount you are able to withdraw to validate you meet the 10 per cent deposit requirement," says Housing New Zealand.

There are price caps to get the HomeStart grant, ranging from $550,000 in Auckland to $350,000 for other parts of New Zealand. The house price or salary caps don't apply if you're just withdrawing your savings from your provider.

Applications for the HomeStart grant are on the Housing NZ website.

Disclaimer: Information provided is stated accurately to the best of the respondent's knowledge at the time of publication. It is general in nature and should not be construed, or relied on, as a recommendation to invest in a particular financial product or class of financial product. Readers should seek independent financial advice specific to their situation before making an investment decision.