Mostly good news in recent legislation on KiwiSaver affecting would-be home owners looking to buy or build
Iam looking to use my KiwiSaver, except the $1000 government kickstart, to buy my first home. have been pre-approved by my KiwiSaver provider but it has also let me know this cannot be used to help with the deposit.
I am unsure how it helps firsthome buyers get into the market quite so easily as the Government suggests, then, because you still have to have a large deposit saved.
There’s been a few changes to KiwiSaver affecting first home buyers — and it’s mostly good news.
April 1 saw the glamorously titled Taxation (KiwiSaver HomeStart and Remedial Matters) Act 2015 kick in.
Most of the headlines were about it enabling KiwiSavers dipping into KiwiSaver to buy their first home to now use their member tax credits — previously this had been off limits.
The new rules also boosted the grant available to first-home buyers on modest incomes looking to buy a newly built home.
If Housing New Zealand, which manages the HomeStart grant, gives you the tick it can add up to an extra $10,000, or $20,000 for a couple, on top of the funds you withdraw from your KiwiSaver account.
I spoke to your provider, ANZ, and asked it to explain some changes affecting house deposits that were also bundled into that new legislation.
It says: “Yes, the Government has announced a change taking effect on June 1 that will allow members to use their KiwiSaver funds for a deposit (in some circumstances).
“This paragraph [below] from the IRD website explains the change.”
Eligible KiwiSaver members will be able to withdraw their available savings to contribute towards the initial deposit of their first home purchase, as opposed to previously only being able to utilise their savings at settlement. However, the withdrawal amount must be protected until settlement by ensuring funds pass through a solicitor’s or a conveyancing practitioner’s trust account, with an undertaking now required that the funds will be returned to the KiwiSaver provider if the sale does not proceed.
“The member’s solicitor is the best person to talk to in terms of their options and how the changes will work in practice,” ANZ says.
“Even though KiwiSaver funds are not currently available for deposit purposes, banks still recognise KiwiSaver funds when they look at total lending and what is required for a deposit. We will enable first-home withdrawals providing the solicitor provides us with the required undertaking and the member meets the criteria,” ANZ says.
“We are happy to talk further with the member about how they can factor their KiwiSaver savings into their overall lending for a first home — which they do even though in practice it can’t be ‘paid’ for a deposit.”
The reason for this rule change is to make it easier to get the money together to pay a deposit on a new home purchased off the plan or a house and land package.
The new HomeStart grants have also been tailored to make it simpler to use those funds, if you’re eligible, towards the down-payment on a yetto-be built home.
Now last week saw more changes to KiwiSaver — although Finance Minister Bill English assures us there will be no more tinkering — the $1000 kick-start payment was dropped.
First-home buyers were never able to take this money out, the idea being that it would remain in their account as a way of ensuring the KiwiSaver account remained open and active.
Those joining KiwiSaver from today and looking to use that money in three or more years’ time for a first home will still need to leave $1000 in their accounts, but it will be covered by their own contributions rather than the kickstart payment.
Disclaimer: Information provided is stated accurately to the best of the respondent’s knowledge at the time of publication. It is general in nature and should not be construed, or relied on, as a recommendation to invest in a particular financial product or class of financial product. Readers should seek independent financial advice specific to their situation before making an investment decision.