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SEPTEMBER 2016

First Home Purchasers

What we do for you.

With house prices rising, it becomes exceedingly difficult for first time home buyers to purchase their first home.  More often than not the need arise for parents to guarantee their children’s lending to assist them in obtaining a deposit or mortgage advance.  This of course is not an ideal situation.

Kiwisaver and more specifically the Home Start Grant and Welcome Home Loan has been put in place to assist first home buyers in buying their dream home. 

What is a Kiwisaver Home Start Grant?

The Home Start Grant is a tax free grant up to $5,000 for an individual buying an existing or older home and up to $10,000 for an individual buying a new build home. For eligibility, an applicant needs to:

  • Have contributed towards Kiwisaver for a minimum of three years;
  • Be aged 18 and older;
  • Be an NZ citizen or permanent resident;
  • Be a first home buyer and not currently own any other property or land;
  • Plan to live in the house and not purchase it for investment/rental purposes;
  • Not have received a first home grant before;
  • Have earned an annual income of $85,000 or less (before tax) in the last 12 months for one applicant or a combined gross annual income before tax of not more than $130,000 (where more than one person is purchasing).
  • Be pre-approved by a certified lender.

What is a second chance withdrawal?

People who have previously owned a home may be eligible for a second chance withdrawal of their Kiwisaver if their financial situation is similar to that of a first home buyer. For eligibility, an applicant needs to:

  • Have owned a home before (but no longer have an interest/share in a property) and have not received the first-home withdrawal before;
  • Been a member of Kiwisaver for at least three years;
  • Have realisable assets totalling not more than 20 percent of the purchase price;

From 1 July 2016 the income limits for second chance withdrawals were removed and income will is not taken into account by Housing New Zealand when assessing eligibility. 

Your Kiwisaver Scheme Provider will need a written confirmation from Housing New Zealand that you are eligible for withdrawal of your Kiwisaver fund for second chance withdrawals.  We would therefore suggest you apply to Housing New Zealand for pre-approval of second chance withdrawal in anticipation of a purchase.

What is a Welcome Home Loan?

This loan is designed for first home buyers who do not have a 20% deposit. With a Welcome Home Loan, Housing New Zealand insure the loan for the Bank, allowing them to  provide loans with a deposit of 10% or more of the purchase price. The eligibility requirements for the Welcome Home Loan is the same as with the Home Start Grant. The purchaser will however have to proof to the Lender that he/she/they will be able to service the mortgage at a lower deposit level.  You will also need to have a minimum 10% deposit of the purchase price of the house you wish to purchase and the house needs to fall within the specified regional house price cap, which for Auckland is currently $600,000 for an existing house.

Our recommendation

Before you sign an agreement to purchase, run it past us first. For example, agreements for sale and purchase do not always allow enough time for the draw-down of Kiwisaver funds from the date of signing the agreement to the date of settlement. The average turn-around time for the Kiwisaver Application is 10 to 15 working days and in some cases up to 20 working days. If we receive the agreement prior to signing, we can make sure the correct time limits and conditions are put in place.

What is the House Price Cap (for existing houses)?

House prices are capped as follows:
Auckland                                                                                             $600,000

Special Housing Areas                                                                        $500,000

Rest of New Zealand                                                                          $400,000

Case Study

Mr B & Mrs X owned a property jointly in the Auckland district.  Mr B and Mrs X separated and the joint property was sold.  The sale proceeds were shared equally.  Each party received $50,000 from the sale proceeds.

Mrs X wants to purchase a Unit in the same area for $550,000.  Mrs X has been contributing towards Kiwisaver for a number of years and has $20,000 available in her Kiwisaver.  Her annual income is $60,000.  Mrs X will be eligible to retrieve up to $19,000 of her Kiwisaver fund.

Mrs X also wants to apply for a Home Start Grant.  As Mrs X is interested in purchasing an older/existing property she is eligible for a Home Start Grant of up to $5,000.

The property Mrs X is purchasing is in the Auckland area and falls within the $600,000 Regional House Price Cap.  Mrs X has been pre-approved by Westpac (who is a participating Welcome Home Loan Lender) for a home loan.  In calculating her Kiwisaver of $19,000, the Home Loan Grant of $5,000 and her $50,000 savings, Mrs X realise she still does not have enough cash in hand to pay a 20% deposit.  Mrs X can now apply for a Welcome Home Loan to subsidise the shortfall of the required 20% deposit.

Participating Welcome Home Loan Lenders

  • Westpac
  • TSB Bank
  • Kiwibank
  • Co-operative Bank
  • SBS Bank
  • Heartland Bank
  • NZCU Baywide
  • NZCU Employees
  • Nelson Building Society

The information in this article was correct as at 1 August 2016. However it is likely that there will be further policy announcements that will affect the operation of Kiwisaver. Check with us before making final decisions.