Did you know most first home buyers use KiwiSaver to help fund their deposit to purchase their first home?

Matthew Dawe, Mortgage Broker and Financial Adviser here. And I'm gonna give you some tips on KiwiSaver, how to use it, how do you qualify, the process of actually withdrawing it, the timing and a few other tips and tricks.

So, I'm a Mortgage Broker accredited with 50 lenders in New Zealand, we help clients get pre-approved, and negotiate interest rates and provide help along the way.

So KiwiSaver, firstly, if you have been contributing to KiwiSaver for more than three years, you can withdraw all your KiwiSaver to help you pay for the deposit on your first home. You have to leave a $1,000 in your account but you can withdraw everything else, so that includes your contributions, your employer contributions, any tax credits from the government and any investment returns, you can withdraw all of it, you just have to leave $1,000 in your account. You have to be purchasing your first home, have not made a withdrawal before. If you're purchasing with a partner, husband or wife or a significant other, it doesn't matter if they've made a withdrawal before or even if they own a home, if you're buying your first home jointly or by yourself, you can withdraw your KiwiSaver.

So, what else can I tell you?

If you've owned a property before and you currently do not own a property, you can apply to Kainga Ora, which is the old Housing New Zealand, to put in an application. To give yourself a second chance, you'll have to fill out an application, you just go to Kainga Ora website. Now keep in mind, Kainga Ora will be assessing you to see if you're in the same position as a first home buyer. That generally means you need to be under 20% net assets of the house price cap for the region. So, if you've got a house price cap in your region of say $800,000 for example, and you can check it out, it's different for Auckland and Queenstown versus say a small regional city or town, you need to be under 20% net assets. So, that means cash, bikes, boats, furniture, everything under 20% of the house price cap for the region. Then Kainga Ora will give you a second chance document or certificate that you can take to your KiwiSaver fund. That will mean you can make another withdrawal.

You cannot make a second withdrawal from KiwiSaver if you've made one. It's only if you're a previous homeowner and currently not a homeowner you can apply for the second chance. Most first homebuyers are using their KiwiSaver to help fund their deposit.

So, in terms of timing, firstly what I recommend that you do is normally I have a strategy session with clients. You can get what's called an eligibility letter from your fund. So, you just go to your KiwiSaver fund, say I'd like to withdraw my KiwiSaver. They will give you effectively an indicative. It's an indicative approval letter stating the amount and then you would qualify to withdraw your KiwiSaver and give you the amount. It still doesn't mean you can withdraw the money.

So, the formal application for KiwiSaver withdrawal is handled by a solicitor or conveyancer. So, a solicitor or a conveyancer helps you with the property transaction. They help review the sale and purchase agreement, help you satisfy any conditions and generally, help you settle the property and attach the mortgage. They are the one that submits the formal application. So, they will submit a formal application, KiwiSaver withdrawal to your KiwiSaver fund. And your KiwiSaver fund, if they approve the money, will send the money to your solicitor's trust account to be used towards the property purchase. If the properties are not purchased, the solicitor needs to return the money to the fund because it must be used for that purpose. Basically a couple of things.

The reason there it's handled through a solicitor is because the solicitor needs to fill out what's called an undertaking. An undertaking is that the fund can only withdraw the money for purposes of buying the first time, but they're reliant on the solicitor to provide the undertaking. In other words, the agreement that they will be using it towards their first fund. So, they're relying on the solicitor for them to meet their legal obligations and the undertaking does that. Otherwise, the money has to be returned to the fund. That's what the law says.

In terms of timing, when your solicitor submits the application, it can take 10 to 15 working days for the fund to release the money. The fund may have to sell a portfolio of shares and other assets to actually pay the solicitor. That doesn't happen instantly and send the money through to your solicitor's account. So, that's timing. That's how it actually works.

Two points I would make on this as little tips from me. You've got two parts of the property transaction. Number one is when you commit to the property, you have to pay a deposit right then and there. Usually 10% of the asking price, but you can negotiate to have the deposit reduced. So, if you need to use your KiwiSaver for that, you'll need to apply for your KiwiSaver before you commit to the property.

The second part is where you actually settle on the property. So, that's when you actually pay for the remainder of the property. That would be that 90% that's remaining on the settlement date. That's normally between two to six weeks after you commit to the property. That's when you actually buy it and you settle the remaining money. You obviously need to make sure that the money is in your solicitor's account before settlement. Your solicitor helps you with the timing of that, but that's essentially the process.

The only other point I would make is if you're going to an auction, some people say, oh, you can't use KiwiSaver if you're going to an auction. That's true, but I've had plenty of first home buyers who have bought at auction and used KiwiSaver as part of the process. If you're wanting to do that, you obviously need to pay the deposit on auction day if you're successful. So, you either need to have other cash or money in your account available.

If you need to use your KiwiSaver for the initial deposit at auction, you'll need to talk to the agent about getting a what's called “a variation to the deposit” so you can apply for your KiwiSaver after the auction, in which case it could take 10 to 15 days to pay.

I'll give you an example.

I've had some clients say to the agent, I'll pay $20,000 and then I'll pay the balance of the 10% deposit or the balance of a 5% deposit, whatever it is, the balance that you agreed to when my KiwiSaver comes through in the next 10 to 15 days. The vendor selling the property would have to agree to that, but they would be silly not to because if you're interested in, you're wanting to purchase the property, I'm sure they'll try to accommodate you with that because a lot of people have money coming from overseas, for example, and can't actually pay the deposit on auction day, but maybe have some money that they're prepared to pay with a balance due. People could have money coming from the UK or Europe or the US or whatever it might be, and it might take them a few days or a week to get that money available in New Zealand to pay the rest of the cost. So, it's very, very common for that to happen.

So, you can use KiwiSaver at auction, just not on auction day. You need to get legal advice about that, but that's essentially the process of what I would normally discuss with my clients so they can be accommodated there.

I hope you've got a lot of value out of this video. That's a little bit about the process, timing, how to actually withdraw on which cases you can. I hope you've enjoyed it.

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Matthew Dawe
Mortgage Broker | Financial Adviser
Phone: 027 321 4287
Email: mortgages@matthewdawe.com
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