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Kiwisaver as deposit for first home

Lately, more and more clients have been approaching us hoping to use their Kiwisaver money as part or all of their deposit for a first home purchase. Which is really great to see. But often, they are confused as to what they can access.

If you want to use Kiwisaver money as your deposit, there are actually two parts to think about.

Part one is the first home withdrawal.

This is where you can take out all of the money you’ve put in, all the money your employer has put in and the interest earned on everything. You cannot withdraw any money put in by the government (ie the $1000 kick-start must stay put). To find out how much you can get out just make contact with your Kiwisaver scheme.

Part two is the first home buyer’s subsidy.

You can get up to $5000 in addition to the first home withdrawal, above. The way it works is that you can get $1000 for every year you’ve been contributing to Kiwisaver, must have been in 3 years, can’t get more than $5000. Your income has to be below certain thresholds (eg combined income for couples must be less than $100,000) and your proposed purchase price is subject to location based caps (eg in Auckland the house has to be under $400,000). To find out whether you’re eligible you need to contact Housing NZ.

The good news – is that you may be eligible for both parts.

The really good news – is that if you’re buying with someone else (partner, brother, friend etc) and both of you are eligible then you can double up and combine the subsidy and withdrawal to make a really decent deposit.

Hope that sorts out any confusion!

December round up

As 2010 limps to a close I’m sure many of you will join with me in letting out a collective ‘thank god for that!’ We’ve had some highlights this year but overall I have to admit it has been a tough one for anyone involved in the property business. Economically the country has been under the pump not to mention the earthquake in Christchurch and the loss of life at the Pike River mine. Those two events certainly made us sit up and appreciate what we’ve got and that our loved ones are safe and well. Economically speaking if you thought it was sluggish out there, you’re right.

Having said that I do think the well worn line of ‘growing stronger in difficult times’ rings true in Godzone with the economy coming into a fairly good position for a solid and gradual recovery over the next 2 -3 years. The country will get a massive kick from the RWC and billions will flow into Christchurch as rebuilding gets going in earnest too. Lets not lose sight of the fact that we produce a lot of ’stuff’ that the world needs  (esp Asia) and 2011 should be an improvement from this year!

Where to for interest rates?

March 2009 represented the low point for interest rates, in fact they were the lowest the country has ever seen. They’ve crept up since then but have really just been sputtering along, a bit like a toddler trying to walk for the first time. While we might get a bit more of that make no mistake – interest rates will begin to go up as the economy and people’s confidence picks up – thats the way it works.

I am in the group that says interest rates may be flat till about March/April and then begin to go up, steadily but not dramatically. 2 year money is well priced at the moment and although it’s higher than the floating rate I think it’ll look like good value in a years time as the floating rate moves on up. But if you don’t want to lock in all of your mortgage splitting it half floating half fixed for 2 years is a decent ploy as well.

Will 2011 be a good time to buy a house?

Yep. Absolutely. I say that because there are heaps to choose from right now and I think it will be that way all year, lending criteria has loosened up a little and interest rates (while on the up) won’t be off the planet. Property values have dropped about 5%-10% across the board since 2008 and look reasonably stable now which is good news for buyers too. Plus if you’re a first home buyer and have been in Kiwisaver for 3+ years the government will help boost your deposit.  Pretty benign conditions overall in 2011 for home buyers I’d say.

Thanks

For reading, for your questions and feedback but especially for your custom and referrals this year. David and I look forward to doing it again with you in 2011. Have a good one, Campbell Hastie

 

$18,000 house deposit – thanks Kiwisaver!

I’ll cut straight to it – if you’re not in Kiwisaver yet (or an equivalent scheme), somethings wrong with you.

Although thousands of people have signed up there is still a group of people who seem paranoid about getting into it. In terms of simplicity it’s a good scheme. That a heap of people who probably weren’t doing anything about their retirement have been spurred into action also makes it a good scheme. As an employee, for every dollar you put in someone else adds another dollar fifty (roughly). And you get $1000 for signing up. What’s not to like?

But the really fantastic part of the scheme in our opinion is the first home buyer subsidy. It’s a massive benefit to anyone who aspires to property ownership. Is that you?

It works like this:

If you have never owned a home*, you can withdraw some of your Kiwisaver funds to help pay the deposit so long as you have contributed to the scheme for at least 3 years. You get $1000 for every year you contribute starting at $3000 up to a maximum of $5000.

You can also take out your own contributions, your employer’s contributions and the interest earned on the lot and put it toward your first home. You can’t touch the government contributions though and there are house price and income thresholds to consider too.

How about some numbers to see how much you’re looking at?

Let’s say you earn $50,000 before tax per year and contribute 2% towards Kiwisaver.

Your annual contributions will be about $1000. Your employer matches this, so add another $1000.

If you’ve been contributing for the minimum three year period that’s $6000 of your own money available for a house deposit. Now add the subsidy of $3000 which gives a total of $9000 for your deposit. Not bad, but here’s the really cool bit.

Most people buy a house with their spouse or partner. If that person has also been in Kiwisaver for three years you can ‘double up’. And if their numbers are just like yours (above) you’ve got a deposit of $18,000!!!

Home ownership might be a whole lot closer than you first thought. Find out if you’re eligible for a first home subsidy and how much you can get by going here. Then call us to arrange for your mortgage pre-approval on 0508 462 489.

*In fact, it may be possible to access the subsidy even if you have owned a home before.

 

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