Happy birthday, KiwiSaver!
Not since a young Mary-Kate (or was it Ashley?) Olsen stood up and said, “you’re in big trouble, mister” has a six year old been so wildly popular.
KiwiSaver gained 200,000 signees in its first two months, and latest figures show almost half of all New Zealanders (2.1 million) have a KiwiSaver account. In the last month alone it attracted 25,000 new members.
So what’s the attraction? KiwiSaver was started primarily as a retirement scheme and, with superannuation being such a political football, the idea of having some certainty of income at 65 appeals.
Where KiwiSaver is making a real difference right now, though, is for younger New Zealanders looking to buy their first home.
In 2012, 10,733 first home buyers withdrew $120.2 million – more than double the 2011 figures. On top of that, by the end of May the Government had dished out $15.7 million via the first home deposit subsidy – already beating last year’s total of $9.5 million.
And hey, why not? As Mary Holm told the New Zealand Herald yesterday, “it makes sense for younger people. For teenagers and people in their 20s, retirement is a foreign concept for them – it’s so far away. But buying a first home is not; it’s something they can aim at.”
Over at interest.co.nz David Hargreaves is less pleased with developments, accusing the Government of fanning the property market flames at the same time the Reserve Bank is trying to douse them.
Our views on why first home buyers shouldn’t suffer for the sins of others (indeed using an earlier column from Mr Hargreaves as evidence) have been made clear.
We must also make clear that we cannot legally give advice on joining KiwiSaver or what you should do once you’re a member – talk to your provider if you want specialist advice. But, if you’re looking to buy a house and are interested in how KiwiSaver can help, here’s some stuff worth knowing:
Withdrawing KiwiSaver savings to buy your first home
To be eligible you must have been a member of KiwiSaver for at least three years.
Any Government contributions cannot be withdrawn but everything else (your and your employer’s contributions plus interest) can.
If you’re a first time buyer you need to apply through your KiwiSaver provider. If you have owned a property before, and wish to try your luck, you need to get the OK first from Housing New Zealand. If you currently own property, then no soup for you.
If you have previously owned a house you may be eligible to withdraw savings if your combined annual income (before tax) is under $100,000 (for one or two buyers) or $140,000 for three or more. To find out if you qualify download and fill in the application form.
You cannot withdraw money to buy an investment property; only for a house you intend to live in.
More information on the savings withdrawal process can be found here and here.
KiwiSaver first home deposit subsidy
First home buyers can also apply for a subsidy of $1000 for each year they’ve been KiwiSaver members.
You must have been in KiwiSaver for at least three years. After five years you are eligible for the maximum $5000. Two eligible people buying a home together could, therefore, receive up to $10,000.
You must apply though Housing New Zealand rather than your KiwiSaver provider.
If you’re looking to buy a house with someone who doesn’t qualify for a subsidy, apply anyway – you may still be eligible.
You must actually live in the house you buy for at least six months, otherwise Housing NZ can ask for their money back.
There is a price cap on the house/section that you plan to buy. This is $400,000 for Auckland, Wellington City, Selwyn District and Queenstown Lakes District, and $300,000 for everywhere else.
This subsidy counts toward your total finance available for buying your first home – so take your confirmation letter to the bank when applying for a mortgage. You need to apply for the subsidy at least four weeks before settlement date.
You can get this subsidy preapproved before you search for a house. This preapproval lasts for 180 days; if you haven’t found a place by then you will have to reapply.
More information on the first home deposit subsidy can be found here and here, and you can download the application form here.
Over to you
Are you a happy home-buying KiwiSaver member? Are you a savings sceptic who hasn’t joined? Do you think it’s better to keep all your savings for retirement than to put any into a house? We’d love to hear from you in the comments below or on our Facebook page.
