The government announced on 31 July changes to Housing New Zealand’s KiwiSaver HomeStart scheme to help more first home buyers into the property market. These changes are effective from 1 August. If you’re looking at buying your first home, it pays to check whether you’re eligible to withdraw your KiwiSaver funds using the KiwiSaver First Home Withdrawal and to see if you 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.
KiwiSaver First Home Withdrawal
If you’ve been a member of a KiwiSaver fund for three years, you’ve never owned a home before and the property will be used 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.
Housing New Zealand KiwiSaver HomeStart Grant
The HomeStart Grant is different from the KiwiSaver First Home Withdrawal scheme; the grant money comes from Housing New Zealand – it does not come out of 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 of money of 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 that you may be eligible for will depend on whether the home being purchased is 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 may apply for a HomeStart Grant to purchase a home jointly. The maximum amount that may be 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).
The criteria
As well as having contributed to a KiwiSaver fund for at least three years, there are other eligibility criteria that must be met. The new changes mean that from 1 August 2016 if you are purchasing the first home by yourself, your household income must be below $85,000 before tax, and it must be below $130,000 before tax for joint purchasers (was $80,000 and $120,000 respectively). You also cannot have owned your own property before. In certain circumstances, however, you may still be eligible if you have previously owned a home – you will 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 now be under $600,000 for Auckland City, and below $500,000 for Christchurch City, Hamilton City, Hutt City, Upper Hutt, Kapiti Coast, Porirua City, Queenstown Lakes District, Selwyn District, Nelson, Tasman, Tauranga City, Thames, Coromandel, Waimakariri, Wellington City and Western Bay of Plenty. For the rest of New Zealand the purchase price needs to be under $400,000. 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.
What else?
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 contact us as soon as possible to start the process. Negotiating that no ‘cash clause’ is inserted into the agreement will ensure no one can take the property out from under you while you’re waiting to get confirmation of your eligibility.
Do contact your KiwiSaver provider to check your eligibility and entitlement before you start looking at potential purchases. As well, 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.