KiwiSaver Mortgages

Your KiwiSaver First-Home-Buying Questions Answered

6 MIN READ June 3, 2020
You might know that you can use KiwiSaver to help purchase your first home, but do you know if you’re eligible to use it? Do you know how much you can actually use? And how do you even go about doing it? We’ve put together…

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:

  • your contributions,
  • your employers’ contributions,
  • any interest that you’ve earned, and
  • any member tax credits, 
  • minus $1000 that must remain in your KiwiSaver account after withdrawal.

You can’t withdraw funds transferred from an Australian Complying Superannuation scheme into your KiwiSaver account.

It’s 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 to withdraw my KiwiSaver?

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 can’t 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.

Note: 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 the 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 signing of the Agreement and that the deposit is paid to the vendor’s 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.

Note: You cannot use your KiwiSaver funds for the deposit on Auction Day itself.

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

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

If you would like to discuss using KiwiSaver towards buying your first home or any matters related to buying and selling residential property, get in touch with us today!


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