Q. I read your recent column about buying a home with KiwiSaver. I didn't know that buyers in Hawke's Bay can buy a house worth only up to $300,000. My wife and I have been putting 8 per cent into KiwiSaver for the past five years and have worked out that together we could get out $50,000 in a First Home Withdrawal. We have two children and expect to pay at least $350,000 for a house near their school in Taradale.
A. The column you refer to answered a reader's question about the "Second Chance" KiwiSaver withdrawal. This is for people who have owned property in the past but no longer do so. They have to apply to Housing New Zealand under the "Second Chance" option to withdraw funds from KiwiSaver. Only people with modest income and assets qualify and if they are looking to buy in Hawke's Bay the price cap of $300,000 applies. The same criteria apply for the First Home Deposit Subsidy. Indeed, if your combined income is less than $120,000 you could look at applying for this subsidy yourselves.
This would give each of you up to $5000 towards your first home and you do not have to pay this money back as long as you live in the home for at least six months.
If you pursue this option you will be limited by the Hawke's Bay price cap of $300,000, but it would get you into the property market with a smaller mortgage. You may think you won't find anything big enough for your family in Taradale for this price, but it may just take some negotiation. The latest ASB Housing Confidence Survey reported that the mood of would-be house buyers is at its lowest level since 2007 so this could be a good time to be looking for that bargain.
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If you earn more than $120,000 between you, then you will not be eligible for the First Home Deposit Subsidy. You will only be considering the KiwiSaver First Home Withdrawal and no price cap applies. You can apply to withdraw all your own and your employer contributions plus (or minus) investment returns, but no Government contributions nor funds transferred from an Australian super scheme.
Anyone who has been contributing to KiwiSaver for at least three years and is planning to buy a first home is eligible to apply for a First Home Withdrawal. Importantly, you must have an unconditional contract but must allow enough time before settlement (at least 10 days) before submitting your application.
It would be wise to get all the paperwork done in good time. If your application is too late you will not get the money. You cannot receive the money after settlement has taken place, as by then you own the property and are no longer a first-home buyer.
You can talk to your KiwiSaver fund manager about getting pre-approval so that you will know what to expect and to avoid any last-minute delays. The money will be paid into your solicitor's bank account on settlement day and cannot be used before that to pay the deposit. If for any reason the purchase does not proceed, either on that day or in a delayed settlement, the money has to be repaid to your KiwiSaver account.
We all hear from time to time how difficult it can be to get money out of KiwiSaver before age 65. You will be pleased to know that in the case of a First Home Withdrawal it is straightforward and your fund manager will be able to help you with the process.
This is one of the primary purposes of KiwiSaver so you should not encounter any problems.
Shelley Hanna is an Authorised Financial Adviser FSP12241. Her disclosure statement is available on request and free of charge by calling 870 3838. The information contained in this article is of a general nature and is not personalised. Send your KiwiSaver questions to firstname.lastname@example.org