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Your Money Story: buying an affordable house using KiwiSaver

15 April 2015 / Published in Your Money
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Your Money Story is a series of blog posts by real people sharing their money experiences.

Hannah Merceanu is ASB’s Social Media Editor, as well as an ASB customer. Hannah and her partner are using their KiwiSaver savings to purchase a house and land package.

My boyfriend and I first started thinking seriously about buying a house when we were at university – it’d always been something we’d aspired to do but when my boyfriend’s brother bought an apartment, it really inspired us to think seriously about our future.

When we graduated university a year and a half ago we started seriously looking at the housing market and assessing our finances. After many calculations and conversations, we realised we’d have enough money for a 10% deposit on a $400,000-$450,000 house with what we had in our savings accounts if we also withdrew our KiwiSaver savings. While we’d only been working fulltime for a few months, we had both been contributing to our KiwiSaver savings since we were in high school, so we had managed to each build up a decent balance.

Our hardest task was actually finding a house that fit our budget and requirements – we looked for months! We were originally looking at older houses that needed a lot of DIY love but as the months went by and the Auckland housing market got harder, even the do-ups were proving to be too expensive for us.

We ended up stumbling across a house and land package we loved, in one of Auckland’s Special Housing areas. Special Housing Areas are an initiative to build affordable houses, set up by the New Zealand Government and the Auckland Council, along with a number of non-profit organisations. Surprisingly, the houses were the same price (or cheaper) than a lot of the older houses we were looking at. Also, as we were constructing our own home, the LVR restrictions didn’t apply to us so this made applying for a home loan with only a 10% deposit a lot easier.

We went unconditional on our purchase of the house last June but it took a while to get the building started. While at first we were disappointed with the delays we quickly changed our tune when we found out about the Government’s plans to change the KiwiSaver first home withdrawal rules. We received confirmation a couple of months ago that our house would definitely be finished after 1st April (when these changes came into effect) so we’d be able to take advantage of these changes.

The two ways you may be able to use KiwiSaver to help you with your first home purchase are: the KiwiSaver first home withdrawal and the KiwiSaver HomeStart grant. Unfortunately our house will be finished too early to take advantage of the changes to the KiwiSaver HomeStart grant (if our house was finishing just a few weeks later we’d have been able to double our deposit subsidy) but we will benefit from the KiwiSaver first home withdrawal changes – we’ll be able to withdraw the Government’s member tax credits from each of our KiwiSaver accounts. Read all about the changes to the KiwiSaver first home withdrawal.

Our solicitor had been waiting until after 1 April to apply to withdraw our KiwiSaver savings– being able to now withdraw the Government member tax credits increases our deposit by about $3,000 – which may not seem like a lot but when you’re a first home buyer with a 10% deposit every little bit helps!

We’re so excited for our new house and are counting down the days until we move in. To us, buying a house is as much about having a place to call our own as it is about setting ourselves up for the future. We envision paying off our mortgage as quickly as possible – while still having some fun along the way – so that we can retire mortgage-free.

It’s important to note that until 1 June 2015 the KiwiSaver first home withdrawal cannot be part of any initial deposit you need to pay the real estate agent or vendor. Until then, you'll need to plan for, and fund any deposit that is required when you sign an unconditional sale and purchase agreement (or are successful at auction). From 1 June 2015, legislative changes will allow a first home withdrawal to be used to make deposit payments in certain circumstances. Various restrictions may mean that you will not be able to use your first home withdrawal for deposit payments in all sale and purchase transactions e.g. auctions. Your solicitor or conveyancing practitioner can advise you further in this regard.

This material is published solely for informational purposes. It has been prepared without taking account of your objectives, financial situation or needs. Before acting on the information in this material, you should consider the appropriateness and suitability of the information, having regard to your objectives, financial situation and needs and, if necessary, you seek appropriate professional or financial.

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