Second chance to buy property
QMy ex-partner and I bought a house 10 years ago without using KiwiSaver. We separated a while ago and the house was sold. I put the money into my business. I would now like to buy a house in my own name — can I do that with my KiwiSaver money? I live in Nelson.
AThere are not many opportunities to withdraw KiwiSaver funds before retirement, but buying a home is one of them, if you qualify. Rising property prices have made it difficult to get on the property ladder as it is hard to save for a deposit while also paying rent. Saving through KiwiSaver is made easier due to topups both by employers and the Government.
There is good reason for encouraging home ownership. It allows people to raise their standard of living by improving their home; it is associated with higher wealth as, unlike renting, mortgage payments are a form of saving. Home ownership also protects against rent inflation for those, like retired folk, on fixed incomes and it may also provide a source of equity that can be drawn on in an emergency. A high level of home ownership also creates morestable communities as people are less inclined to move, and children may have more continuity with schooling. For these reasons it is important for government to have policies like the KiwiSaver First Home withdrawal and the first home grant to encourage home ownership.
Because you have previously owned property you are not a first home buyer. However, there is the opportunity to make a second chance KiwiSaver withdrawal. This is not quite as straightforward as someone who has never owned property, but if you are deemed eligible you will be able to withdraw all but $1000 from your KiwiSaver. Ka¯ inga Ora manages this process and assesses your eligibility. You may also qualify for the First Home Grant of up to $5000. Criteria include an asset limit of no more than 20 per cent of the house price cap for existing properties for the area you are buying in. The price cap in Nelson is $400,000 so your maximum asset limit is $80,000. Realisable assets are belongings that you could sell to help buy a house, such as shares, bank savings and boats or caravans (worth over $5000). KiwiSaver funds are not included in this calculation. It does not mean that you are limited to buying a house valued at under $400,000 – this is the case only if you also apply for a First Home Grant.
There are a number of steps you need to take to buy a home using KiwiSaver, and it is important to do these in the right order. For example, do not buy land before making your application – ownership of land will make you ineligible for a First Home withdrawal. A mortgage broker will help set out a road map for you. You should contact Ka¯ inga Ora to find out more about the second chance withdrawal. Your KiwiSaver provider will also be able to help you.
Shelley Hanna is a financial adviser with Peak Portfolio Management Ltd, which holds a licence FSP702451
issued by the Financial Markets Authority to provide financial advice
services. Disclosure information at www.peak.net.nz or call 06 8703838. The information provided in this article is of a general nature and
should not be relied on as a recommendation to invest in a
financial product. Send your KiwiSaver questions to shelley.
hanna@peak.net.nz