Kiwisaver: First home really means first home

It's fantastic to get help to buy a first home, but you can't use KiwiSaver for a second one. Photo / Getty Images

Q: Our son decided he would like to have a house, but he hadn't saved very much money. "Bank of Mum and Dad" paid for the house and relieved him of the savings he had. At this time, he did not belong to KiwiSaver. He and his mother were registered as equal owners. As time went on, he inherited a sum of money, which he used to repay his half of the cost of the house. He has now been in KiwiSaver for more than five years and has a healthy balance. He has repaid his half of the purchase price and is repaying us the other half so he can become the sole owner. We have not put the house in his name entirely yet as a protection. Can he access the funds he has in KiwiSaver as a first-home buyer?

Your son has been very lucky to have your financial help. With your backing it sounds like he is well on his way to paying off his first home and he has also built up savings in KiwiSaver along the way.

So can he use those KiwiSaver funds to buy out the share of the home owned by his mother?

I put it to Therese Singleton, general manager, investments and insurance at AMP, who says anyone wanting to withdraw funds from their KiwiSaver for a first home needs to have been in KiwiSaver for at least three years, which your son has done.

One of the benefits of KiwiSaver is people wanting to get into their first home can use virtually all their KiwiSaver funds - only $1000 needs to stay in the account - to buy or build a house, once they have clicked over that three-year anniversary.

Between July last year and June this year $213 million was withdrawn from KiwiSaver accounts to do just that.

"However, the other eligibility criteria is that the member must never have owned property before, either on their own or jointly with others," says Singleton.

"As your son is the co-owner of the property, unfortunately he will not be eligible to make a KiwiSaver first-home withdrawal."

Unless your son gets into real financial difficulty or decides to permanently live overseas in any country other than Australia, his KiwiSaver funds are tied up until he hits retirement age. There are some circumstances where a person who has owned a home before but no longer does can apply to buy a house using their KiwiSaver funds.

This is aimed at people who, through a change in monetary circumstances - maybe a relationship break-up or a failed business - are back to square one financially.

In this case Housing New Zealand, rather than the KiwiSaver provider, will assess whether a person is in the same financial position as someone buying a house for the first time.

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.

To have your KiwiSaver questions answered by the NZ Herald's panel of industry players, email Helen Twose.
Helen cannot answer all questions, correspond directly with readers, or give financial advice.