Preparing Your KiwiSaver for a Home Loan: Why Conservative Funds Matter
When you’re getting close to buying your first home your KiwiSaver account becomes more than just a retirement fund — it becomes part of your house deposit. That’s why it’s so important to manage it carefully in the months leading up to applying for a home loan and settling on a property.
One of the biggest risks first-home buyers face is market volatility. If your KiwiSaver is in a high-growth or balanced fund and the market takes a sudden dip, your deposit could shrink at the worst possible time, just before settlement. That’s where moving to a conservative fund can make all the difference.
What Is Volatility?
Volatility is a word that gets used a lot in investing, but it simply means how much the value of an investment goes up and down over time. High volatility is when investments go up and down quickly and by large amounts. Low volatility is when investments move slowly and by smaller amounts.
KiwiSaver funds that invest in shares (like growth or balanced funds) tend to be more volatile. This means your balance can rise quickly when markets are doing well, but it can also fall just as fast when markets drop. If you need to take money out at the wrong time — when your fund is temporarily down — you might end up with less than you expected.
It is important to understand volatility when you’re about to buy a home. You need your KiwiSaver to be stable and reliable, not bouncing around when you’re about to settle on a house.
Your KiwiSaver Is Part of Your Deposit
For many first-home buyers in New Zealand KiwiSaver makes up a significant portion of their deposit. It could be the difference between qualifying for a mortgage or not. But unlike money in a savings account KiwiSaver is usually invested in the share market or other assets, which means its value can go up or down.
When you're still years away from buying, those ups and downs are part of the long-term investment strategy. But when you're only months or weeks away from needing that money, it becomes risky to leave it exposed to market fluctuations.
The Risk of a Market Dip
Imagine this: you've saved for years, have your pre-approval in place, and you're ready to put an offer on a house. You plan to withdraw your KiwiSaver for settlement in the next month. Then the market dips, your KiwiSaver balance drops by thousands overnight. Suddenly, you’re short on your deposit and at risk of losing the property.
This situation happens more often than you might think. It’s heartbreaking, but preventable.
Why a Conservative Fund Helps
Conservative funds are lower-risk investment options. They usually invest more heavily in stable assets like cash and bonds, and less in shares. This means they grow more slowly over time, but they’re much less likely to lose value suddenly.
If you're planning to use your KiwiSaver for a house deposit in the next 6 to 12 months switching to a conservative fund helps lock in the gains you've already made and protect your balance from sudden market changes.
You won’t see big returns, but you’re also far less likely to see big losses. In this case, stability is more important than growth.
When Should You Make the Switch?
There’s no perfect timeline, but a good rule of thumb is to consider moving to a conservative fund at least 6–12 months before you plan to withdraw your KiwiSaver for a home purchase. If you're already actively looking at homes, or expect to buy within the year, now is the time to make the change.
Keep in mind that switching funds can take a few business days so it's wise to plan ahead.
How to Check and Switch Funds
Most KiwiSaver providers have online portals where you can view your current fund and switch to another one. If you're unsure what fund you're in or how to switch, you can contact your KiwiSaver provider or speak with a financial adviser.
Before switching, take a moment to check:
Your current fund type (e.g. growth, balanced, conservative)
Your current balance
Your estimated house deposit timeline
After this consider whether it's worth locking in what you’ve already earned.
Protect Your Deposit — Don’t Leave It to Chance
Buying a home is stressful enough without worrying about whether your deposit will still be there at settlement. If you're using KiwiSaver to help buy your first home moving to a conservative fund could give you the certainty you need at a crucial moment.
Don’t go chasing high returns, protect what you’ve worked hard to build. Make the switch early, reduce the risk, and give yourself peace of mind as you step closer to home ownership.