Q. My parents enrolled me in KiwiSaver when I was 15. I am 20 now and have $6500 in my account. Can I use it all towards buying my first home?
A. You meet the first requirement for using KiwiSaver to buy your first home, as you have been a member for at least three years.
However, you can't apply to withdraw all your savings, only your own and any employer contributions. The $1000 kickstart and Government tax credits must remain in the scheme until you turn 65.
However, you may also qualify for the First Home Deposit Subsidy administered by Housing New Zealand. This is a generous scheme but many people who could benefit have not heard about it. The subsidy is available for lower income first home buyers, and for second chance home buyers who meet the criteria.
Housing NZ has a 12-page pre-approval form for the First Home Deposit Subsidy on their website. This is worth a read so that you can find out what is involved in the application process. For every full year that you have contributed the minimum (currently 2 per cent of your salary) to your KiwiSaver account, you may be entitled to $1000, up to a maximum of $5000 towards your first home. Consider contributing to KiwiSaver for five years to get the full subsidy.
There are qualifying criteria including income and asset limits, and you have to live in the house for at least six months.
It is a generous scheme for first home buyers like you because, unless you live in the house for less than 6 months, the money does not have to be paid back. Ever. If two people buying a house together qualify for the full subsidy, they could get $10,000 between them.
Although the Reserve Bank is reviewing loan to valuation ratio limits, many banks are lending up to 95 per cent of valuation. To buy a property worth $250,000 you may need to find just $12,500 yourself through personal savings, KiwiSaver and the First Home Deposit Subsidy. (You will also need to cover legal fees and other costs.)
When the time comes to look for a house, let everyone know your plans well in advance - that includes Housing NZ, your bank, your lawyer, any estate agent and your KiwiSaver provider. Allow at least a month to organise the paperwork, and have your applications processed. Don't enter into an agreement for sale and purchase without first checking what you can get from KiwiSaver and the First Home Deposit Subsidy and how long the process will take.
Shelley Hanna is an authorised financial adviser FSP12241. Her free disclosure statement is available on request by calling 8703838. The information in this article is of a general nature and is not intended to provide personalised advice. For other KiwiSaver questions go to www.peak.net.nz or email firstname.lastname@example.org.