There are two ways to use KiwiSaver towards your first home purchase, the HomeStart grant and the first home withdrawal.
You'll need to prove you're a first home buyer (or in the same position as a first home buyer — following a divorce, business failure or similar) to qualify. If your partner doesn't qualify as a first home buyer you may be ruled out.
Once you've proved you qualify you can — under the KiwiSaver first home withdrawal scheme — use your KiwiSaver funds, your employer's contributions and any member tax credits towards the home purchase, providing you leave a minimum balance of $1000 in your account.
The grant option is over and above that and is free money if you qualify. It's awarded to first home buyers who have saved for three years minimum with the maximum payment for five years continuous savings.
The grant is $1000 a year after three years up to $5000 per person for an existing home or $2000 a year up to $6000 for a new home purchase. A couple can each apply for the grant, doubling their allocation.
The maximum income allowable is $85,000 for a single buyer or $130,000 for a couple.
Some, but not all, of the rules to be aware of for the grant include the price cap in Auckland of $600,000 for second-hand homes and a maximum of $650,000 for new. It's lower in other centres.
If you're not working nor contributing to KiwiSaver for a period of months or years, then that time will be deducted from your grant. Check carefully that you have contributed the minimum for each year.
Watch out, says Stuart Wills, mortgage broker at The Mortgage Supply Company, if you've taken time off work for parenting or other reasons. There's a useful eligibility checklist here.
The maximum grant per home is $10,000 (or $20,000 if new). You can't get more than that even if you club together with more than two people to buy. Since 2015 it has been possible for KiwiSaver members to access their savings before the sale and purchase has gone unconditional, says Wills.
Previously members were able to access their savings only at settlement. This change is especially useful for first home buyers who want to buy homes off the plan. It means members can now access their savings for the initial deposit.
But don't leave it too late. You have to give 20 working days (four weeks) notice before settlement. It's possible to get pre-approval while you're house hunting. Be aware, says Wills that your pre-approval won't be valid if you choose a home over the price caps.
You must live in the house for six months after buying. If not, you'll have to repay the grant with interest on top. If you want to qualify for the higher grant for a new home, the house must have received its Building Code compliance certificate within the previous six months of the grant application.
You can't use the grant to build a home only. This isn't a problem if you're buying a house and land package. Don't, however, think you can buy the land first and assume you will get a grant for the subsequent build.
Old homes on new land don't qualify, so moving an existing/older house onto a section does not constitute a new build property and is only eligible for the standard grant.
New homes must have projected completion dates that must be included in the contract if you want to qualify for a grant.
With a new home, the grant may be held in trust or escrow until settlement date, which can cause problems if your builder wants progress payments.
There are tricks that a good mortgage broker will know. Many of Wills' clients are buying new homes with turnkey contracts, meaning paying a deposit with the balance payable on completion.
Check and recheck. You don't want to be the buyer who assumes they'll qualify but doesn't.