KiwiSaver Home Withdrawls
KiwiSaver First-Home Withdrawal: An Overview
KiwiSaver is widely known as a retirement savings scheme but it also provides a valuable opportunity for people looking to buy their first home. After three or more years as a KiwiSaver member you may be eligible to withdraw most of your savings to put towards the purchase of your first home. This can make a real difference to your deposit, helping you move from aspiring homeowner to settled resident faster.
How the Withdrawal Works
Eligible members can withdraw their contributions, employer contributions, government tax credits and the investment returns they’ve earned. At least $1,000 must be left in the account after the withdrawal. These funds can be put towards the purchase price of a first home or land where you intend to live. The catch is that the property must be for owner-occupation. You can’t use KiwiSaver first-home withdrawal for investment properties or holiday homes.
If you’re a member of a complying fund (not just a KiwiSaver fund) the rules are similar, but not every fund offers this feature. It’s important to check with your fund provider if you’re unsure.
Do You Qualify?
To be eligible for a KiwiSaver first-home withdrawal you must have been a member of KiwiSaver or a complying superannuation fund for at least three years. The withdrawal is available if you’ve never owned a home or land before or if Kāinga Ora determines that you’re in a similar financial position to a first-home buyer (even if you have previously owned property). You must also intend to live in the property as your main residence and be buying within New Zealand.
If you’re a previous homeowner your financial situation will be assessed by Kāinga Ora to determine eligibility. If approved you’ll need to provide the qualification letter to your scheme provider to complete the withdrawal process.
How Much Can You Withdraw?
You can withdraw all your funds except for $1,000. $1,000 must remain in your account. This includes your own and your employer’s contributions, the government’s annual contributions and any returns your investments have made. The exact amount available depends on your savings history, your contributions and your fund’s performance. If you need a figure for your mortgage or solicitor you can request a conditional approval letter from your KiwiSaver provider.
The Application Process
If you’re ready to buy you’ll need to contact your KiwiSaver provider or the provider of your complying fund to apply. You’ll be asked to supply a signed sale and purchase agreement listing you as the purchaser and your solicitor will generally coordinate the payment. Remember, if you’re a previous homeowner in a similar financial position to a first-home buyer you’ll need Kāinga Ora approval before applying to your provider.
Timing is important! Apply at least ten days before you need access to your funds and allow more time if you’ve spent any period overseas while contributing to KiwiSaver. Also, you must be mindful that you can only make a first-home withdrawal once so it makes sense to be certain before you proceed.
Using KiwiSaver Funds for a Deposit or Settlement
If your sale and purchase agreement is conditional you can use the funds for your deposit, though this comes with added risks if the sale falls through. Money withdrawn is sent to your solicitor’s trust account and can usually be returned to your KiwiSaver account if the purchase does not proceed, with the exception of potential losses from fees or third-party costs. Any balance not used for the deposit will be held until settlement.
If your agreement is unconditional the withdrawal funds are used for settlement day, paid from your solicitor to the vendor.
Important Considerations When Withdrawing for Your First Home
Withdrawing from your KiwiSaver can be incredibly helpful but it’s worth weighing the benefits and the drawbacks. The clear advantage is that you can boost your home deposit, giving you a better footing in the property market and possibly helping you secure your preferred property ahead of schedule. A home can also serve as a long-term financial asset that may rise in value.
However, dipping into your retirement savings means you’ll have less time for your fund to grow before you turn 65. The lump sum you take out now won’t be there to compound for your retirement. It’s important to review your long-term plans and consider how you’ll rebuild your savings over the years ahead.
Check Your Fund Before and After Your Purchase
If you are thinking about a first-home withdrawal review whether your current fund suits your situation. If you’ll need funds soon a conservative fund can protect your balance from market dips leading up to your withdrawal. After buying your home, and if you have decades before retirement, you may wish to move to a fund with a higher growth profile to maximise long-term returns.
Practical Tips for a Smooth Process
Start early by checking your eligibility and getting your paperwork in order. Discuss with your solicitor or conveyancer how the withdrawal will work around your sale and purchase agreement, especially if you are buying at auction or making a conditional offer. Make sure all forms are submitted in plenty of time to avoid any last-minute delays.
A Stepping Stone to Homeownership
KiwiSaver is designed to help New Zealanders secure their financial future. For many, that means not just a comfortable retirement but owning a home along the way. By understanding the process and thinking through the implications you can use your KiwiSaver savings to unlock the door to your own first home providing both security now and a platform to rebuild for the future. Taking advantage of the first-home withdrawal feature can put your retirement savings to immediate, practical use. Remember to keep saving for the years beyond.