When you think of KiwiSaver, do you automatically think it’s a retirement savings scheme? Well, it can also help you into your first home.
If you are eligible, you can make a withdrawal to boost your house deposit. The conditions you must meet are:
- You have had a KiwiSaver account for at least 3 years.
- You have never owned a home or land before, either in New Zealand or overseas (in most cases).
- You must be planning to live in the home.
- You must live in New Zealand.
What fund are you in?
If you intend on using your KiwiSaver for your first home, it is a good idea to make sure you are in the right type of fund when setting up your KiwiSaver.
For example, if purchasing a house is quite far off, you might want to be in a growth fund to build a higher balance. But if you are thinking it could be in the next few years, you might be best to be in a more conservative fund, which brings lower returns, but less risk. Timeframes and risk tolerance are a big consideration, but you also need to think about your situation and what you want to achieve.
The cost of withdrawing from KiwiSaver for a house
On the flip-side, it’s a good idea not to let planning for the long-term slip through the cracks. Eligible first-home buyers can withdraw all but $1,000 from their account (with a few minor exceptions, i.e. money transferred from Aussie Super).
However, the bigger the withdrawal, the greater the impact on your long-term retirement savings could be. This is based on a combination of factors, like your age, the fund you’re in, and the amount withdrawn. A numeric example* may help:
John has been saving since he was 18, starting with earnings of $40,000 a year and investing in a fund earning 7.5 percent after taxes and fees. John could potentially enter retirement with $1.16 million. However, if John were to withdraw all of his funds (except $1,000) at 30 to purchase his first home, he could end up with only $428,000 at retirement.
Property and financial well-being
Having said all that, there are valid reasons to consider home-ownership.
Owning your own place can be a great step towards wealth generation and financial security. As time passes, your home’s value will likely increase and create equity in your home. Plus, once you’ve paid off your home loan, you’ll free up a great deal of income.
When pondering your options, make sure you take every element into account.
Always seek personalised KiwiSaver advice
You don’t have to make these decisions by yourself. This is our area of expertise. Our KiwiSaver team can talk to you about your situation, in a way that you understand, and work out what type of fund will work best for you to achieve your goals. We can also check if you are eligible for a withdrawal from your KiwiSaver. Talk to us today.
Need help applying for your mortgage?
We also have an expert team of Mortgage Advisers who can help you secure a mortgage for your first home. Their service is free of charge as they are remunerated by the lender. They will work closely with you and guide you through the process. With their extensive knowledge and experience at your fingertips, the process should run a lot smoother.
