Your secret weapon for getting on the ladder
KiwiSaver is a government-backed savings scheme helping New Zealanders save for retirement. It comes with some great benefits, like contributions from your employer and tax credits, making it a smart choice for retirement planning. But you might not realise that KiwiSaver can also be a powerful tool when purchasing your first home.
Using KiwiSaver for your first home
Under certain conditions, you can withdraw contributions – any made by your employer and any investment returns earned on those contributions – for a deposit on your first home. This applies to both existing properties and new builds.
To be eligible for this opportunity, there are a few key criteria that must be met:
• Membership duration: You need to be a KiwiSaver member for at least three years.
• Residency: You must be a New Zealand citizen or a permanent resident or on Resident Visa.
• First-time buyer status: You must not have owned a home or land, in New Zealand or overseas.
The benefits of using KiwiSaver for a deposit
Here’s why you as a first-home buyer should consider leveraging the potential of KiwiSaver:
• Faster saving: Using KiwiSaver for a deposit can speed up your saving journey. The contributions from both you and your employer, along with any investment returns, can add up to a significant sum over three years.
• Reduced mortgage burden: By using KiwiSaver funds as a deposit, you can shrink the size of the mortgage you need. This leads to lower monthly repayments, giving you more financial breathing room.
• Access to the property market: With property prices still high in many parts of New Zealand, getting into the housing market can feel like a big challenge. KiwiSaver provides a practical way to bridge the gap and step onto the property ladder. And for your first home, you might only need a 10% deposit.
• Potential for higher equity: A bigger initial deposit can result in more equity in your property from the start. This can be an advantage, opening up opportunities for refinancing or getting extra finance for home improvements.
• Government contributions and tax credits: KiwiSaver members might also be eligible for government contributions and tax credits, giving your savings an extra boost.
How to apply
If you meet all the criteria, applying to use your KiwiSaver as a deposit is straightforward.
Here’s what you need to do:
1. Get in touch with your KiwiSaver provider. Inform them of your intention to use your savings for a first home purchase. They will guide you through the process and provide the necessary forms and information. Note: If you don’t know your KiwiSaver provider, you can find it on your myIR account under the KiwiSaver section.
2. Complete the withdrawal application form. Your KiwiSaver provider will give you the specific form for a first-home withdrawal. It will require your personal details, property details and the amount you intend to withdraw.
3. Provide supporting documentation. You may need to submit additional documents like proof of citizenship or permanent residency, a signed sale and purchase agreement for the property and bank account details for the transfer of funds.
4. Submit your application. Once you have completed the withdrawal form and gathered all necessary documentation, submit them to your KiwiSaver provider.
5. Wait for approval. Your KiwiSaver provider will review your application and, if everything is in order, approve the withdrawal. This process can take several weeks, so it’s important to be patient.
6. Funds transfer. Once approved, the funds will be transferred to your solicitor’s trust account. The funds will become part of the deposit for your first home purchase.
7. Complete the home purchase. With the deposit in place, you can now purchase your first home. Work with your solicitor and real estate agent to navigate the legal aspects of the transaction.
Getting you across the line
With KiwiSaver, your first home might be closer than you think. If you meet the eligibility criteria and plan wisely, you can make the most of this government-supported initiative. But remember, while KiwiSaver can be a big help, it’s important to carefully consider your financial situation and seek professional advice when making major financial decisions.
If you’d like advice on how to use your KiwiSaver as a deposit, speak to the team at Global Finance today. We’ll help you start the process.
The information and articles published are true to the best of the Global Finance Services Ltd knowledge. Since the information provided in this blog is of general nature and is not intended to be personalized financial advice. We encourage you to seek Financial advice which is personalized depending on your needs, goals, and circumstances before making any financial decision. No person or persons who rely directly or indirectly upon information contained in this article may hold Global Financial Services Ltd or its employees liable.