KiwiSaver: Second time not always a charm

You are able to withdraw your KiwiSaver funds if you have owned a home before but strict criteria apply. Photo / GETTY IMAGES

We have owned a home before, but don't now so are termed "second-chance buyers". We are finding it difficult to get a correct answer about whether we can use our savings for a deposit. Our earnings are more than $120,000 in total and we have been told we are not eligible. But we do not want a subsidy grant from the Government. Is there anything I'm missing here?

KiwiSaver can get confusing where first-home buyers are concerned, and you're certainly not alone in getting in a muddle.

The aim of the first-home withdrawal provision is to get people on a modest income into a modest home and those wanting to buy a first home who have been in KiwiSaver for at least three years and have a sales and purchase agreement should get in touch with their KiwiSaver provider to arrange a withdrawal.

KiwiSaver also recognises people like you, who have owned a home before but don't now.

Therese Singleton, general manager, Investments & Insurance at AMP, says a second-chance buyer is someone who can prove to Housing New Zealand (HNZ) that they are in a similar financial position to that of a first-home buyer.

"You must not have already used your KiwiSaver funds to buy a first home," says Singleton. Previous home owners apply to their KiwiSaver provider, but HNZ will run the ruler over the application.

It will consider your financial position, including income and the other assets you may have, to ensure you're starting from scratch again. Shares, money on term deposit, classic cars and other assets worth more than $5000 are taken into account. Where you may not be eligible is your joint income. You need to be earning under the $80,000 or $120,000 benchmarks set for the HomeStart grant.

If HNZ did find you eligible, however, it would then be up to your KiwiSaver provider to release your funds, as long as you meet the other requirements - "such as having a valid sale-and-purchase agreement and you have been in KiwiSaver for at least three years," says Singleton.

I recommend getting in touch with your provider when you kick off your house hunt to find out whether your funds are available to buy a home and to walk you through the process.

Buying house and land packages or off-the-plans packages has become easier after rule changes in April. Those who earn $80,000 and under, or less than $120,000 between them, could also be eligible for the KiwiSaver HomeStart Grant run by Housing New Zealand on top of withdrawing KiwiSaver funds.

Once you have been contributing to KiwiSaver for three years you may qualify for an extra $3000 - or $6000 for a couple. Every additional year of contributions to KiwiSaver gives you a further $1000 up to a maximum of $5000 - or $10,000 for a couple. The grant doubles for people buying a newly built home.

As well as the salary cap, there are maximum limits on the house price, which vary between regions.

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.