KiwiSaver: How it works and why it's great for first home buyers
Home values have sky-rocketed over the past few years and it’s harder than ever for first home buyers to get a foot in the market. Government schemes such as KiwiSaver offer financial assistance but many people aren’t sure if they qualify and how much help they can get.
So we got in touch with Stephen Brent, a partner at law firm Cavell Leitch, to decipher the rules and regulations surrounding these schemes.
Hi Stephen. What financial aid is available for first home buyers?
There’s KiwiSaver and the HomeStart grant. KiwiSaver allows you to withdraw your own savings in contribution to your first home, while the HomeStart grant offers additional funds based on your savings.
Exactly how much can you get from these schemes?
KiwiSaver allows you to withdraw almost all or some of your savings (provided you leave at least $1,000 in your account), so it’s up to you. The HomeStart grant offers $1,000 for each year you’ve been a contributing member of KiwiSaver — up to $5,000 per individual. But if you intend to purchase a newly built home or to build, this doubles to $2,000 per year up to a maximum of $10,000.
How do you know if you’re eligible?
To be eligible for either of these schemes you must have been contributing to KiwiSaver for at least three years and intend for the property to be your primary residence — and it must be in New Zealand.
There are extra conditions for HomeStart: the property must be within the regional house price cap (in Queenstown that’s $500,000 for a second-hand property and $550,000 for a new property — it’s $400,000 and $450,000 respectively for the rest of the lower South Island). Your annual income must be less than $85,000 (single buyer) or $130,000 (2+ buyers), you must have a 10% deposit and you must live in the house for at least six months after purchase.
What about second home buyers? They’re sometimes just as financially stretched. Can they get any extra help?
Yes, KiwiSaver offers a “second chance” scheme. But you need to be able to prove you’re in the same financial position as a first home buyer — you can’t have realisable assets totalling more than 20% of the house price cap for the area.
Is there anything else people need to know?
An important aside is to allow time for KiwiSaver and Housing New Zealand to approve and release these funds. As such, your sale and purchase agreement must contain a finance clause which gives 10 working days to check whether these funds will be available, and you need to leave at least 20 days between confirming the finance clause and settling the sale for your applications to be processed.
Do you have any advice for first home buyers?
My advice would be to speak to a solicitor. They will be able to guide you through the process and timing of making your application to withdraw your KiwiSaver or obtain the grant.
They’ll also be able to review the LIM report and property title — vital due diligence that will alert you to issues such as renovations or additions that were made without consent.