KiwiSaver First Home Withdrawal: All your Questions Answered
18 July, 2018 | Fiona Taylor, Smith & Partners
The KiwiSaver First Home Withdrawal scheme helps first home buyers purchase residential property in New Zealand. For first home buyers a KiwiSaver withdrawal can be a great kick start to saving enough money for your mortgage deposit. If you’re a first home buyer using KiwiSaver, it’s important you understand all the KiwiSaver First Home Withdrawal rules, what you can and can’t do with a KiwiSaver First Home Withdrawal and how to ensure that everything goes smoothly when you use your KiwiSaver to help buy a house (or land). Below we answer your frequently asked questions – from the rules and eligibility criteria, through to how to make sure the process is smooth and stress free.
Who can withdraw money from KiwiSaver to buy a house?
To be eligible to for the KiwiSaver First Home Withdrawal Scheme you must:
Be purchasing your first home;
Have been a member of KiwiSaver for a minimum of three years;
Have your KiwiSaver account with a KiwiSaver provider that allows saving withdrawals; and
Intend to live in the property for at least six months
We recommend that you contact your individual KiwiSaver provider and check their individual policy on withdrawals for first homes.
If you are eligible to withdraw money from your KiwiSaver, you may also be eligible for a first home deposit subsidy of up to $20,000.00 from Housing New Zealand – known as a HomeStart Grant.
I have already owned a house, but I don’t own one now, can I withdraw my KiwiSaver to help buy a house now?
If you have previously owned property, but no longer own any property and your finances are considered to be in a similar position to that of a first home buyer, you may qualify to withdraw KiwiSaver funds towards buying a home.
If you have previously withdrawn funds from KiwiSaver to buy residential property, you will not be able to make a second withdrawal.
You will first need to apply to Housing New Zealand for a KiwiSaver First-home Withdrawal Determination for Previous Home Owner. These applications take a minimum of 20 working days. You can do this yourself without the help of a lawyer on the Housing New Zealand website.
If you are deemed to be in the same financial position as a first home buyer, you will receive a confirmation from Housing New Zealand (HNZ) that you are eligible for previous homeowner withdrawal.
Once you have received this confirmation, you will then need to contact your individual KiwiSaver provider and provide the KiwiSaver First-Home Withdrawal Determination for Previous Home Owner confirmation to get pre-approval for the withdrawal. Ultimately it is your KiwiSaver provider that decides if you are able to withdraw or not.
I’m not in KiwiSaver, but a different employer-based superannuation scheme, can I withdraw money to buy a house?
There are some non-KiwiSaver employer superannuation schemes that also allow for a first home withdrawal in a similar vein to KiwiSaver. Exempt employer schemes do not allow withdrawals.
As non-KiwiSaver schemes are not subject to the same requirements as KiwiSaver providers it is imperative that you contact your individual provider to clarify:
That the provider allows for first home withdrawals
That you meet their specific eligibility criteria for withdrawals
How much you can withdraw
What the conditions are (and application time frames)
Can I use my KiwiSaver to buy a house with my spouse/partner?
If your spouse/partner has not previously owned a home, you can both withdraw your KiwiSaver and pool that money together. You will each need to contact your KiwiSaver providers individually to get pre-approval and to submit applications for withdrawal.
If your spouse/partner has previously owned a home, only you can withdraw from your KiwiSaver to buy a house – if it is your first home (unless the special exemptions apply). But the fact that your partner is already a homeowner does not affect your ability to withdraw your savings.
It is important to note that if one of you is contributing more money, we suggest having an agreement that protects this person’s KiwiSaver money (or savings) if the relationship breaks down and/or if the property is sold for any reason.
Can I use the KiwiSaver First Home Withdrawal to buy a house in the name of a family trust?
This generally depends on your KiwiSaver provider. Many KiwiSaver providers do not allow you to withdraw KiwiSaver funds if the house is going to be owned in the name of a trust, but some do.
You will need to check that the provider of your scheme allows this before signing the agreement for sale and purchase.
The KiwiSaver providers that do allow you to withdraw funds to purchase a house that is owned in the name of a trust require the following:
You must be a trustee and beneficiary of the trust which will own the property.
You cannot be the beneficiary of another trust that owns property, where that property is the KiwiSaver member’s principal place of residence.
When you sign the Agreement for Sale and Purchase, the purchaser’s name must be written as “(Full Name of KiwiSaver/Purchaser) as Trustee of the (Name of Family Trust)” e.g. John Steve Brown as Trustee of the Brown Family Trust.
You must intend to live in the property as your principle place of residence.
Can I use my KiwiSaver to purchase property overseas?
No, the property you buy must be in New Zealand.
Can I make a KiwiSaver withdrawal to buy a house on Maori land?
Yes, withdrawals can be made to purchase a dwellinghouse on Maori land, provided:
You meet meet the other KiwiSaver withdrawal eligibility criteria
You intend the dwellinghouse to be your principal place of residence
You provide additional documents stating you have a right to occupy the Maori Land Eg. a licence to occupy or occupation order
How much of my KiwiSaver can I use to buy a house?
If you are eligible for the KiwiSaver First Home Withdrawal, you are able to withdraw:
all of your contributions,
all of your employers’ contributions,
any interest that you’ve earned, and
any member tax credits
minus $1000. $1000 must remain in your KiwiSaver account after withdrawal.
You cannot withdraw funds transferred from an Australian Complying Superannuation scheme into your KiwiSaver account.
As previously stated, it is best practice to request pre-approval from your KiwiSaver provider and get an estimate of how much you can withdraw. Most mortgage brokers and banks will require this as part of your mortgage pre-approval process.
Is there an income cap?
There are no restrictions on how much you earn in order to be able to withdraw KiwiSaver funds as long as you meet the other criteria.
How much can I spend on the house?
For KiwiSaver first home withdrawals, there is no limit to how much the house can cost.
Can I use my KiwiSaver to buy an investment property?
You cannot use the KiwiSaver Withdrawal to purchase an investment property. You must intend to live in the property for at least six months.
Can I use my KiwiSaver to buy land / a section?
Yes, you can use your KiwiSaver to purchase a section / land without a house. There are no restrictions on when a house must be built. You can also use your KiwiSaver towards a house and land package.
If you already own land, or are being gifted land, you cannot use your KiwiSaver to fund the cost of the build.
Can I use KiwiSaver for a house deposit?
When purchasing property there are two types of “deposit”. The “bank deposit” which is the amount/percentage of money required by the bank that you contribute towards the purchase of the house (usually 10-20% of the purchase price). This deposit is made up of savings, your KiwiSaver withdrawal, and any other funds you receive from the government (such as HomeStart Grants), gifts or loans from parents etc.
There is also the “purchase deposit’ that secures the agreement when you agree to purchase the property. This is generally 10% of the purchase price and is usually payable to the real estate agent on Auction Day or when the agreement goes unconditional.
You can now use KiwiSaver funds to pay the “purchase deposit” – but it is likely that Agreement for Sale and Purchase will need to be modified before you sign it.
You must make it clear to the agent that your deposit is KiwiSaver funds and that the deposit will be payable on unconditional not on signing of the Agreement and that the deposit is paid to the vendors solicitors.
The vendor will also need to agree that their solicitor will hold the funds in the solicitor’s trust account until settlement day. (Normally the real estate agent holds this money on trust until settlement day when the money is paid towards the purchase of the property). So clear communication with the agent is vital.
You cannot use your KiwiSaver funds for a deposit for an Auction.
How do I apply to use my KiwiSaver to buy property?
To use your KiwiSaver to buy a house, you should contact your KiwiSaver provider to get a pre-approval as soon as possible. As part of this process, your KiwiSaver provider should be able to provide you with an estimate of how much you can withdraw. It is important to note that pre-approval does not speed up the official application process.
Once you have an unconditional agreement to buy your first home, you will need to:
Fill in the application form provided by your specific KiwiSaver provider (this can be done with or without assistance from a lawyer)
You will need to sign a statutory declaration, usually this is witnessed by your property lawyer
Attach certified copies of supporting documents to the application
Your solicitor will have to provide a letter referring to the agreement for sale and purchase and the due dates of the deposit and settlement. They will also provide an undertaking as to whether the agreement is conditional or unconditional.
We recommend that you get your property lawyer to submit the application. This allows them to ensure that the application is full and correct, and means that your KiwiSaver provider contacts them directly with any issues.
Most KiwiSaver providers require at least 2 weeks (10 working days) from receiving your lawyer’s letter to process an application, so any settlement date for the purchase of your home will need to be at least 2 weeks from the date all conditions of your agreement are satisfied. Some KiwiSaver providers require 15 working days to process applications.
Due to the importance of these dates, it is vital that you contact your lawyer as soon as (if not before) you agree to buy a property.
If all goes well, on the settlement date, your KiwiSaver provider will send your KiwiSaver money directly to your lawyer, who will forward it on to your bank to form part of your “deposit”.
What can go wrong?
Applying to withdraw KiwiSaver funds (and the process of receiving those funds) takes time.
If not enough time is allowed for the finance condition, or from unconditional date to settlement date, this can cause big problems.
If the application has been filled out incorrectly, or does not include the correct supporting documentation, this can create extra delays in processing the application. The KiwiSaver providers take no liability for delays in processing applications.
If the funds have not arrived from the KiwiSaver provider in time for settlement, they cannot be used towards the purchase. You as the purchaser cannot get a loan from somewhere else to cover the shortfall (for settlement) and then use your KiwiSaver to repay that shortfall loan.
If you do choose to cover the shortfall and complete the sale on settlement day without the KiwiSaver funds, those funds will be locked away until you retire.
If the KiwiSaver funds don’t arrive in time your options are:
Cover the shortfall in price and forfeit the ability to withdraw your KiwiSaver funds
Delay settlement and pay daily penalty interest to the vendor until the money comes through
Default on the contract (don’t buy the house) – and you will most likely have to pay the vendor damages
How can I make things go smoothly?
Get pre-approval from your KiwiSaver as to how much money you can withdraw – this will prevent costly mistakes that can arise from assumptions as to how much you can withdraw.
In the Agreement for Sale and Purchase – allow at least 10-15 working days for the purchaser to finalise Finance conditions.
Allow at least 10 working days from the date the agreement goes unconditional until settlement date.
Submit your KiwiSaver Withdrawal application as soon as you can.
What other programmes are available to assist first home buyers?
The Government is currently supporting three other schemes to help first home buyers to purchase property. Each of the schemes have different criteria and help in different ways. These schemes include:
KiwiSaver HomeStart Grants (Grants of Money from the Government)
Welcome Home Loans (Government backed mortgages that only require 10% deposit)
KiwiBuild – affordable homes only available to be purchased by first home buyers