Here at Freedom Financial we know that for many Kiwis, buying a first home is a significant milestone and one of the most substantial financial commitments they will ever make. Fortunately, New Zealand’s KiwiSaver scheme offers a pathway to help first-time homebuyers achieve this dream. Understanding how to leverage your KiwiSaver funds can make the home buying process more accessible and less financially burdensome. This blog will guide you through the essentials of using KiwiSaver to buy your first home and the benefits it offers.
What is KiwiSaver?
KiwiSaver is a voluntary, work-based savings initiative in New Zealand designed to help individuals save for retirement. However, one of its key features is the ability to use your savings for purchasing a first home. Contributions come from your salary, and both you and your employer make regular payments into your KiwiSaver account. Over time, these contributions, along with investment returns, grow into a substantial sum that can be used for retirement or, importantly for first-time buyers, towards buying a home.
Eligibility Criteria
To use your KiwiSaver savings for a first home purchase, you must meet specific eligibility criteria:
- First-Time Buyer: You must be purchasing your first home. However, if you have previously owned a home but are in a similar financial position to a first-time buyer, you might still qualify for a withdrawal under certain conditions, known as the “second chance” provision.
- Minimum Contribution Period: You need to have been contributing to your KiwiSaver for at least three years.
- Principal Residence: The property you are purchasing must be intended as your principal place of residence. KiwiSaver funds cannot be used for investment properties or holiday homes.
How Much Can You Withdraw?
Eligible first-time buyers can withdraw their KiwiSaver contributions, including:
- Your contributions
- Your employer’s contributions
- Government contributions (excluding the $1,000 kick-start if you received it when you first joined)
This can provide a significant boost to your deposit, making homeownership more attainable.
KiwiSaver HomeStart Grant
In addition to withdrawing your KiwiSaver savings, you may also be eligible for the KiwiSaver HomeStart Grant. This grant provides further financial assistance to first-time homebuyers or those purchasing land to build a new home. The amount you can receive depends on how long you have been contributing to KiwiSaver.
To qualify for the HomeStart Grant, you must meet additional criteria related to income caps, the value of the property, and the duration of your KiwiSaver contributions.
Benefits of Using KiwiSaver for Home Purchase
- Boosts Your Deposit: One of the primary barriers to homeownership is saving for a deposit. Using your KiwiSaver funds can significantly boost your deposit, making it easier to secure a mortgage and reducing the amount you need to borrow.
- Access to Grants: The KiwiSaver HomeStart Grant provides additional financial support, further enhancing your buying power.
- Lower Monthly Payments: A larger deposit means you’ll need to borrow less, which can result in lower monthly mortgage repayments and less interest paid over the life of the loan.
- Achieve Homeownership Sooner: By leveraging your KiwiSaver funds, you may be able to enter the property market sooner than if you were relying on personal savings alone.
Steps to Use KiwiSaver for Your First Home
- Check Your Eligibility: Talk to us at Freedom, we can check to ensure you meet the eligibility criteria for both the KiwiSaver withdrawal and the HomeStart Grant and further help with the steps below.
- Contact Your Provider: Reach out to your KiwiSaver provider to understand the process, the amount you can withdraw, and any necessary documentation.
- Apply for the HomeStart Grant: If eligible, apply for the HomeStart Grant through Kāinga Ora (Housing New Zealand). This application should be made at least four weeks before your deposit is due.
- Find Your Home: Start your home search, keeping in mind the price caps for the HomeStart Grant if you are applying for it.
- Submit Your Withdrawal Request: Once you have an offer on a property, submit your KiwiSaver withdrawal request through your provider. Ensure you provide all required documentation, including the signed sale and purchase agreement.
- Complete the Purchase: With the additional funds from your KiwiSaver and potentially the HomeStart Grant, complete your home purchase with greater financial ease.
Final Thoughts
Utilising your KiwiSaver to buy your first home is a strategic way to overcome the financial hurdles of homeownership. By boosting your deposit and accessing grants, you can secure a better mortgage deal and make your dream of owning a home a reality sooner. At Freedom Financial, we are here to guide you through every step of the process, ensuring you maximize your benefits and achieve your homeownership goals.
For more information about various available options and what’s best for you, give us a call – 0800 667-257, or email us at [email protected]. We would love to hear from you.