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Are investment gains included for KiwiSaver First Home withdrawal?
 
Q.           Both my partner and I have been in KiwiSaver since it started. We are renting at the moment but looking at how much we have in our KiwiSaver accounts we would like to cash it up and put it towards a house. Can we cash it all up or just our contributions? What about investment gains?
 
A.           Anyone who has not owned a home before and has been in KiwiSaver for at least 3 years can apply to withdraw some of their funds to buy their first home. It must be your principal place of residence. If this is the situation for both of you, then you should apply directly to your Scheme provider. 
 
It gets more complicated if either of you has previously owned a house. You may qualify to make a ‘Second Chance Withdrawal’ but you have to apply through Housing New Zealand and there are more rigorous criteria. These include that you no longer own property, your combined income is less than $100,000 and your ‘realisable assets’ are no more than 20% of the price cap for your area. The form that you fill in for Housing New Zealand is the same one used to apply for the First Home Deposit Subsidy. This Subsidy gives eligible buyers up to $5000 each towards their first home (or second home under certain circumstances). It is worth checking with Housing New Zealand to see if you qualify for this Subsidy. It does not have to be paid back so it is basically ‘free money’ for those who qualify. Indeed it is possible to apply for the Subsidy without withdrawing any of your KiwiSaver funds if you have other savings. You can seek ‘Pre Approval’ for the Subsidy before you start looking for a house. The application requires evidence of income and your level of KiwiSaver contributions over the years, so allow plenty of time to gather and submit this information. 
 
If this is a first home purchase for both of you then contact your KiwiSaver Scheme provider. You can apply to withdraw all of your own and your employer contributions, and any investment returns but not the Government ‘kickstart’ or Member Tax Credits. 
 
You cannot submit your KiwiSaver withdrawal request(s) until you have found a house and the agreement has gone unconditional, but you should allow at least 10 business days before settlement.  
 
If you can withdraw say $15,000 each from your KiwiSaver accounts and you qualify for the First Home Deposit Subsidy of $5000 each, this will give you $40,000 towards your home. The Hawkes Bay price cap of $300,000 applies to the Deposit Subsidy (not to KiwiSaver First Home Withdrawals) so you should be looking at houses below that price level. Once you have found a house that you both like, let everyone involved in the process know that you are relying on KiwiSaver for the purchase, particularly your solicitor, the real estate agent and/or vendor. Don’t sign an unconditional sale and purchase agreement – a ‘conditional upon finance’ clause gives you time to negotiate with your bank for the best mortgage deal and confirm how much you can get out of KiwiSaver.
 
It is important to note that the KiwiSaver funds are paid directly to your solicitor’s trust account to settle the property purchase. They cannot be used to fund any deposit. Likewise the First Home Deposit Subsidy from the Housing Corporation is a bit of a misnomer as it is payable to a solicitor on settlement date and is not available for an initial deposit to the real estate agent. Talk to your bank about finance for this.
 
Allow plenty of time, get advice from your solicitor before signing anything and it should be ‘Home Sweet Home’ for you. 
 
 
Shelley Hanna is an Authorised Financial Adviser FSP12241.  Her disclosure statement is available on request and free of charge by calling 8703838.  The information contained in this article is of a general nature and is not intended to provide personalised advice.  If readers have any KiwiSaver questions they would like answered please go to www.peak.net.nz. or email shelley.hanna@peak.net.nz


Published in the Hawkes Bay Today 11 June 2013