James PuahI get asked often if using KiwiSaver for buying your first home is possible. It is, but there appears to be some confusion about this and people are being given mixed messages on this.
Firstly, I can say that there are many people that I have helped who are using their KiwiSaver to buy their first home. It helps with funding the deposit, which is a common obstacle for first home buyers who entering the property market.
Banks typically want a deposit of 20% and anything less is treated as a low deposit and in these cases the banks have restrictions on the amount of lending they can do. Often people that I have spoken to have been told by there bank that they do not have enough deposit and so cannot buy. This may be the case with that particular bank, but it does not mean that they cannot buy – it might just mean they need to work with another bank or lender.
The advantage of having a mortgage adviser is you get access to advice and a range of banks and non-bank lenders.
Using KiwiSaver For Your Deposit
KiwiSaver can be used as part or all of the deposit, but there are eligibility criteria to meet.
You must have been in KiwiSaver for at least three years, and be a first home buyer intending to live in the home for a minimum of 6-months.
Also you must have never withdrawn your KiwiSaver before (there are exceptions) and you also need to qualify for a home loan.
You can generally withdraw all of your KiwiSaver balance including what you have contributed, your employer contribution, the Governments contribution (up to $521.43 each year) and the returns that your investments have earned.
You can contact your KiwiSaver provider and they will email you a summary showing what you can withdraw. We will need this when arranging your home loan so it would be a good idea to get on
What do I need to do to apply for a first-home withdrawal?
First-home buyer
If you are a first-home buyer, please contact your KiwiSaver provider or complying fund provider to apply. You do not need to apply for this through Kāinga Ora – Homes and Communities.
Are You A Previous Home Owner?
If you are a previous home owner, have not previously made a KiwiSaver withdrawal and if you are in the same financial position as is typically the case for a first home buyer then you may be eligible to apply for a “second chance” and get approved for using your KiwiSaver.
You will still need to apply through your KiwiSaver provider; however Kāinga Ora will initially need to determine whether you are a qualifying person.
If you are deemed to be in the same financial position as a first home buyer, the letter produced by Kāinga Ora will need to be forwarded to your KiwiSaver provider, to assist with your application to withdraw your KiwiSaver contributions.
I can then use this when applying for your home loan.
Low Deposit Home Loans
Don’t be put off if your bank has told you that you need a 20% deposit.
You could say that The Reserve Bank is to blame as they imposed LVR restrictions on the banks, but they did this to support the stability of the housing market and there are also exemptions to these rules.
Those exemption include:
- First Home Loans scheme – a low deposit scheme for first home buyers
- New Builds – they want to encourage building of new homes
- Non-Banks – the restrictions apply to banks, not the non-bank lenders
The First Home Loan scheme by Kainga Ora supports some banks to offer loans with as little as a 5% deposit and I have access to a few banks and non-bank lenders that can often offer home loans with 10% deposit too. As mentioned, a lot of banks do not work with the First Home Loan scheme and so we have a limited number to work with, but as I do work with a lot of first home buyers I know the banks policies well and have good success with them.
If you are buying a new build then most banks won’t require a 20% deposit. They vary with what they do require and some banks can still offer a 5% deposit but most are 10% or 15%. Banks also tend to be a bit more strict on criteria for new build finance too as the costs for building can be hard to lock-down even with fixed price contracts.
Let’s Get Started
The first step is to assess your borrowing capacity and enhance your situation if possible. This is a simple process and we can start with a simple conversation or you can complete an online application straight away.
Then we can get a pre-approval for your home loan so you can go and look for your new home with confidence.
If you have been thinking about using KiwiSaver for buying your first home then we should speak about what is best. It’s what I do everyday!
Feel free to contact me anytime.
