Maximising Your KiwiSaver for a Home Deposit
For many Kiwis, purchasing a first home is a significant milestone, and KiwiSaver has become an essential tool in achieving this goal. The KiwiSaver scheme not only helps you save for retirement but also offers the opportunity to use your savings as a deposit for your first home. Understanding how to maximise this benefit can make a substantial difference in your home-buying journey.
Understanding KiwiSaver First Home Withdrawal
The KiwiSaver first home withdrawal allows eligible members to withdraw most of their KiwiSaver savings to put towards buying a first home. To qualify, you must have been a member of KiwiSaver or a complying superannuation fund for at least three years. You can withdraw all your contributions, your employer’s contributions, investment returns, and any government member tax credits, provided you leave a minimum balance of $1,000 in your account.
Eligibility Criteria
To be eligible for a first home withdrawal, you must:
- Have been a member of KiwiSaver for at least three years.
- Be a first-time home buyer intending to live in the home.
- Be purchasing a home or land within the country.
- Not have made a previous first home withdrawal.
If you have previously owned a home, you may still qualify if Kāinga Ora determines that you are in a similar financial position to a first-time buyer.
Combining KiwiSaver with Other Grants
In addition to the KiwiSaver first home withdrawal, you may be eligible for the First Home Grant. This grant provides up to $5,000 for an existing home and up to $10,000 for a new build, depending on how long you have been contributing to KiwiSaver. Combining these funds can significantly boost your deposit, making it easier to secure a home loan.
The Process of Withdrawing KiwiSaver Funds
- Estimate Your Withdrawal: Before applying, get an estimate of how much you can withdraw. This is crucial for obtaining conditional approval for a home loan.
- Confirm Eligibility: Obtain a letter from your KiwiSaver provider confirming your eligibility to make a first home withdrawal.
- Application: Complete the first home withdrawal application form provided by your KiwiSaver scheme provider. This form must be witnessed by a Justice of the Peace or a solicitor.
- Documentation: Provide a copy of the sale and purchase agreement listing you as the purchaser, and a completed solicitor’s or conveyancing practitioner’s letter.
- Timing: Submit your application well in advance of the date you need the funds, as the process can take time. You cannot make a withdrawal after the property purchase has settled.
Pros and Cons of Using KiwiSaver for a Home Deposit
Pros:
- Reduces Deposit Barrier: Using KiwiSaver can significantly reduce the amount you need to save independently, making homeownership more accessible.
- Investment in Property: Owning a home can protect you from rent increases and provide an asset that may appreciate over time.
Cons:
- Reduced Retirement Savings: Withdrawing funds for a home deposit will reduce your KiwiSaver balance, potentially impacting your retirement savings.
- Opportunity Cost: The funds withdrawn could have continued to grow within KiwiSaver, potentially leading to a higher balance at retirement if left untouched.
Maximising your KiwiSaver for a home deposit involves understanding the eligibility criteria, combining it with other grants, and carefully managing the withdrawal process. While using KiwiSaver can make homeownership more attainable, it is essential to weigh the benefits against the potential impact on your retirement savings. Consulting with financial advisors and engaging with your KiwiSaver provider can help you navigate this process effectively, ensuring you make the most of your savings while achieving your homeownership goals.