Your Kiwi Saver

QUESTION: In your column last week you mentioned the First-Home Deposit Subsidy. How do you qualify for that?

ANSWER: This subsidy is run through Housing New Zealand for KiwiSaver members. Any people who have been contributing to KiwiSaver for three years or more and want to buy their first home should find out if they qualify for the First-Home Deposit Subsidy.

The First-Home Deposit Subsidy can also be accessed by KiwiSaver members who have owned a home before, but are in a financial position similar to someone who does not own a home.

Although it is called a deposit subsidy it is only paid out on settlement day, not before. Talk to your bank and your solicitor to make sure you can get all the money you need before you sign a sale and purchase agreement.

If you apply for the subsidy you are not obliged to withdraw your KiwiSaver contributions as well, although you may wish to. This is a separate process, managed by the trustee of your KiwiSaver scheme.

The subsidy is designed for people on modest incomes to help them buy modestly priced homes. The income limit for one or two people is $100,000pa. You can buy a house jointly with more than two people, in which case the income limit is $140,000. The house should cost no more than $300,000 ($400,000 in Auckland, Wellington or Queenstown).

For every full year you have contributed the minimum amount of your income or benefit, or a percentage of the minimum hourly wage if you are not in work (being 4 per cent to 31 March 2009 and 2 per cent thereafter) you should be entitled to $1000, up to a maximum of $5000 for five years' contributions. As KiwiSaver has been going for just over four years, no one will qualify for the full subsidy yet. A couple who both qualify could get $8000 towards their first home now, or $10,000 after June 30, 2012. If you think you'll qualify, it may be worth waiting until then.

When you apply to Housing New Zealand, you need to give them full information of your income, your KiwiSaver contributions, the income of anyone buying the house with you, and a copy of the sale and purchase agreement. Allow at least four weeks for the application to be processed.

Does the subsidy have to be repaid? Only if you live in the house for fewer than six months. Otherwise, it is yours to keep. So it is a generous subsidy and a good incentive, particularly for younger people, to join KiwiSaver.

Shelley Hanna is an authorised financial adviser FSP12241. Her disclosure statement is available on request and free of charge by calling 8703838. The information contained in this article is of a general nature and is not intended to provide specific or personalised advice. If readers have any KiwiSaver questions they would like answered please go to www.peak.net.nz or email shelley.hanna@peak.net.nz.