August 30 2016
With rising house prices and stricter conditions for finance, people are saying the Kiwi dream of owning a home is over. If you explore the options, the Kiwi dream is alive and well. One option that could help you into your first home is Kiwisaver. Talk to our conveyancer and property lawyer if you need further advice.
What’s changed with KiwiSaver?
The government made changes to Housing New Zealand’s KiwiSaver HomeStart scheme to help more first home buyers into the property market, effective 1st August 2016. If you’re looking at buying your first home, you may be eligible to withdraw your KiwiSaver funds using the KiwiSaver First Home Withdrawal and qualify for the HomeStart Grant. Depending on how long you’ve been in KiwiSaver, the money you receive will go a long way in helping you open the door to your first home.
If you’ve been a member of a KiwiSaver fund for three years, never owned a home before and intend to use the property as your principal place of residence, then you may be eligible to withdraw your KiwiSaver savings (except for the $1,000 government kick-start) through the KiwiSaver First Home Withdrawal scheme to put towards the purchase of the property.
The HomeStart Grant is different from the KiwiSaver First Home Withdrawal scheme; the grant money comes from Housing New Zealand, not your personal KiwiSaver account. The HomeStart Grant is an initiative designed to help first homebuyers. If you have been regularly contributing towards your KiwiSaver scheme for at least three years, you may be eligible for a grant up to $10,000 per person to put towards the purchase of your first home. If you are buying the property with another person (or other people), each of you may qualify for the grant.
How much can you get?
The amount of the HomeStart Grant you may be eligible for will depend on whether you’re purchasing a new or existing home. If the home has received its Code Compliance Certificate within the last six months, or is a property that has been bought off the plans, or you are buying land to build a new home, then you may be entitled to a HomeStart Grant of up to $10,000. For purchases of older properties, you may be eligible for up to $5,000.
Up to three KiwiSaver members can apply for a HomeStart Grant to purchase a home jointly. The maximum amount granted for a single property is $20,000 for a new home, and $10,000 for an older home, regardless of how many people are purchasing the property together.
Who qualifies for a HomeStart Grant?
You’re eligible if you have contributed to a KiwiSaver fund for at least three years, your household income is below $85,000 before tax, or below $130,000 before tax for joint purchasers, and you haven’t owned your own property before. In certain circumstances, you may still be eligible if you have previously owned a home – you’ll just need to receive dispensation from Housing New Zealand.
The house price caps have also increased under the new rules. To qualify for the grant, the value of the existing home must be below $400,000 if you’re buying in the greater Hawke’s Bay area. The price caps for new homes, and land and fixed building costs, have increased by a further $50,000 on the above existing home limits.
The final condition of the KiwiSaver HomeStart Grant is that you need to live in the purchased home for a minimum of six months from the settlement date. If you don’t comply with this condition, you may have to repay the grant, along with interest.
Make sure you can tick all the boxes.
First, contact your KiwiSaver provider to check your eligibility and entitlement before you start looking at buying a house. Apply for pre-approval for the HomeStart Grant online to see how much you qualify to receive. This will assist in setting your maximum price range, as well as speeding up the process once you’ve found a property.
If your ability to purchase the property relies on you receiving your KiwiSaver and/or the HomeStart Grant, you must make the agreement subject to finance and allow sufficient time to make the applications. Housing New Zealand needs at least four weeks from receiving an application through to paying out the HomeStart Grant, so make sure you speak to our conveyancer and property lawyer as soon as possible to start the process. We can also negotiate a no ‘cash clause’ into the agreement to ensure you don’t lose your opportunity to purchase the property while you’re waiting for confirmation.