The KiwiSaver First Home Withdrawal and KiwiSaver HomeStart Grant– getting more funding towards a purchase
Let’s be honest, the more money you can get towards the purchase of a new property, the less money you have to borrow and the less time you’ll be in debt. Presently, there are two helpful sources of additional funds for your purchase – the KiwiSaver HomeStart Grant (administered by Housing New Zealand) and the KiwiSaver First Home Withdrawal (administered by your KiwiSaver scheme provider).
Although both are slightly time consuming to apply for, they’re well worth doing and the property team at Saunders & Co is experienced in assisting purchasers with such applications, especially KiwiSaver First Home Withdrawal applications which require the specific assistance of a solicitor. For contact details, please visit the contacts page of the Saunders website.
The KiwiSaver HomeStart Grant (previously called the KiwiSaver First Home Deposit)
The KiwiSaver HomeStart Grant may entitle you to free funds of up to $20,000 from Housing New Zealand. There are two grants available:
- Purchasing an existing home: the grant is between $3000 to $5000, determined by how many years you’ve been a member of KiwiSaver ($1000 per year);
- Building or purchasing a new home or land to build a new home on: $2000 per year of KiwiSaver membership with $10,000 being the maximum for each member.
Two people can join together to purchase a single dwelling. So for two people joining together to buy an existing home, the maximum value of grants available would be $10,000 and for those buying a new property, the maximum value would be $20,000.
Of course, conditions apply. To be eligible:
- You must be at least 18 years old;
- Have been contributing to your KiwiSaver scheme for atleast 3 years;
- Been contributing atleast the minimum amount to KiwiSaver;
- Be purchasing your first property (although there are exceptions – see below);
- Have a threshold household income of $80,000 or less per annum (before tax) for one person, or for two people, the combined household income of $120,000 or less per annum (before tax);
- Have a deposit of atleast 10% of the purchase price ready to use. The grant cannot go towards the deposit as it is received by your solicitor on the settlement date. Therefore it may only go into the funds for settlement.
Note: For those who have previously owned a home, you may still be eligible for the HomeStart Grant in certain circumstances, decided by Housing New Zealand. Essentially you must be in a similar position financially to someone buying for the first time. Please contact Housing New Zealand or your lawyer for more information.
The following information will be required for the application:
- Proof of each applicant’s total income earned in the last 12 months (payslips and bank statements are useful).
- Proof of KiwiSaver contributions – getting a transaction statement showing all contributions. A summary that only shows the total funds contributed is not enough.
- Identification that shows your name, such as a copy of your valid passport or driver’s licence.
- A signed copy of the Agreement for Sale and Purchase; or, if building, a fixed-price building contract or a contract with a developer or builder. The proposed settlement date must be atleast 4 weeks away.
- If required, evidence that you can pay the deposit (or atleast 10% of the purchase price).
If you are only looking for a home, you can still send an application away for pre-approval. Pre-approvals can last for up to 180 days so if you don’t find a property within that time, you will have to apply again. If you’ve already found a suitable property and to ensure you allow plenty of time for processing, have the application and necessary supporting documents filled out and ready to be sent off. They can take some time for Housing New Zealand to process, up to 4 weeks, so it is best not to leave them to the last minute. Housing New Zealand requires application to be sent to them 20 working days prior to settlement.
Also, please ensure that, if you are applying for the grant in order to meet the financial conditions of your Agreement for sale and purchase, you do so at least 10 working days prior to the unconditional date so that Housing New Zealand has time to process the application.
Applications that do not provide the required four weeks’ notice may not be accepted and therefore the HomeStart grant may not be paid out. The HomeStart grant will not be paid out after settlement has occurred.
More information can be found at www.hnzc.co.nz/kiwisaver.
The KiwiSaver First Home Withdrawal
This withdrawal allows you to withdraw some or up to all of your KiwiSaver contributions, except the initial kick-start of $1000, to go towards the purchase of your first home. The KiwiSaver withdrawal can include the contributions of you as a member and of your employer, any of your tax returns as a member, and returns on investments received.
The application is sent to your Kiwisaver provider once the Agreement for Sale and Purchase is unconditional. If accepted, the withdrawal funds will be transferred to your solicitor’s trust account for the settlement date (if your request is processed in time) – thus it cannot be put towards your deposit.
Before applying for a withdrawal, it is best to find out information such as:
- What type of Kiwisaver Scheme you belong to;
- Who your provider is;
- How long you have been contributing to the scheme; and
- How much you have been contributing and the total amount.
The withdrawal is administered by your KiwiSaver provider so you apply directly to your KiwiSaver provider. (There is no need to apply to Housing New Zealand unless you a previous home buyer – see below).
Talk to your provider as soon as you start looking for a home to get an idea of the funds that may be available to you. Most providers require atleast 10 working days from the time your solicitor confirms that the Agreement for Sale and Purchase is unconditional to process your request for withdrawal. Having the necessary information ready to go beforehand is important to ensure that processing can be done in time for the funds to be released to your solicitor for settlement. Due to the strict timeframes, it is preferable for your Agreement to have the settlement date about 15 workings days after confirmation.
The information you must supply with your application includes:
- A statutory declaration on the validity of the information contained. Solicitors are some of the few that can witness such declarations so it is always best to involve a lawyer;
- you solicitor’s letter of undertakings;
- Your solicitor’s trust account deposit slip;
- A copy of the Sale and Purchase Agreement;
- A certified copy of evidence of your address; and
- A certified copy of your identity.
Thus you can see that this application requires assistance from a solicitor. This form can be sent off once you have entered an unconditional agreement to purchase.
Again, conditions on retaining the Grant without having to pay it back, apply:
- You must live in the property for residential purposes and for 6 months after settlement. Consequently, your Agreement should specify that vacant possession must be given on settlement so that you can move in straight away.
- You must declare that you will not act fraudulently and that you have supplied correct information.
Note: If you are a previous home owner, the assessment of your financial eligibility is conducted by Housing New Zealand top determine your eligibility based on your income and assets.
To download the Kiwisaver withdrawal application form click here.