My partner and I are buying our first home. He has owned a house before but it's my first and I plan to use my KiwiSaver which has a balance of over $80,000. We have made an offer on a house but the vendors want a delayed settlement. Can I make my KiwiSaver withdrawal in two portions — the first for the deposit and the second for settlement? I am hoping that investment markets will do well and I'll get a better return than if the funds are sitting in my lawyer's trust account.
You have probably seen your KiwiSaver balance increase steadily over 2020 and 2021, and that has made you optimistic about future returns.
However, markets have been volatile since the start of 2022. Interest rates are rising as central banks try to slow down inflation.
This has affected shares as well as bond (fixed-interest) investments. Russia's attack on Ukraine has also impacted on market sentiment, with prices falling.
Anyone considering buying a house within the next 12 months may be wise to review their risk profile and consider moving down the risk ladder.
In any event, you are not allowed to withdraw your funds in two portions — you can only make one First Home Withdrawal. If you apply to withdraw funds for the deposit, you cannot then apply for more money for the settlement.
When you submit your withdrawal application to your KiwiSaver provider, it should be for the full amount you require.
You must leave $1000 in your account (this will be the Government 'kickstart' — or equivalent for those who did not receive it).
You do not have to withdraw the maximum amount from your KiwiSaver, but you only get one opportunity to make this withdrawal so you may be better off getting out as much as possible, and then increasing your KiwiSaver contributions to build up your balance again.
Ask your provider for a First Home Withdrawal application form — it will contain all the instructions and information that you need.
Hawke's Bay mortgage broker Matthew Hooper helps many people into their First Home with KiwiSaver. He says: "You really can't start the process too soon. A mortgage broker can help with every stage of the process, including giving you an idea of your borrowing capacity and positioning your application in the best possible way. Getting advice early helps to prevent mistakes. One such mistake is buying a section before you apply for a First Home withdrawal. Anyone who does that, will find that they are no longer eligible as they now own property."
KiwiSaver funds are paid directly to your solicitor's trust account. Allow plenty of time, get advice from your solicitor before signing anything and it your home ownership dream can become a reality.
- • Shelley Hanna is a financial adviser with Peak Portfolio Management Ltd which holds a licence FSP702451 issued by the Financial Markets Authority to provide financial advice services. Disclosure information is available at 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 shelley.hanna@peak.net.nz