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Home buyers need to plan long term

Q.        My wife and I owned a house once but sold it 18 years ago. We have been saving into KiwiSaver and found a house that we want to buy. We thought we would qualify to withdraw our savings plus get the HomeStart grant, which would give us $27,000 all up. Between us we usually earn less than $120,000 p.a. but with overtime we earned $129,000 over the past 12 months. Because the income limit is $120,000 for a couple we were turned down. It feels like we are being penalised for working hard. Why doesn’t Housing New Zealand just look at your regular pay and not overtime when working out what you are eligible for? Now we have to find that $27,000 somewhere else or lose the house.
 
A.       You are indeed in a difficult position. Someone like you who has owned a home before (however long ago) has to prove to Housing New Zealand that you are in a similar position to a first-home buyer, with limited assets and income, before you can apply to your KiwiSaver fund manager to make a withdrawal of funds. 
 
Housing New Zealand also assesses your eligibility for the HomeStart grant (formerly known as the First Home Deposit Subsidy). The cost of buying a house has increased over recent years and this has led to changes in the eligibility criteria. Unfortunately, this has not helped you. The income limit for two buyers was raised from $100,000 to $120,000 back in 2013. From 1 April 2015 the price cap for Hawkes Bay was raised from $300,000 to $350,000 and in Auckland from $485,000 to $550,000. Other regions such as Wellington and Queenstown have a price cap of $450,000.
 
Your best option may be to postpone your house buying plans until your income falls within the specified limits or look for a more affordable house and leave your KiwiSaver for your retirement. 
 
For other readers thinking about using KiwiSaver for a home purchase, Housing New Zealand has a useful booklet entitled ‘Buying your first home with KiwiSaver’ which is available free online or in hard copy. There is also a handy Eligibility Calculator on their website. You can input information on your situation and receive guidelines as to whether or not you are likely to qualify for the HomeStart grant. Once you have worked your way through that, you should then read the 16 application form (also available on the Housing New Zealand website). You can apply for pre-approval before you start looking for a house, and this is valid for 180 days. 
 
Housing New Zealand runs free roadshows around the country to provide information to first-home KiwiSaver buyers. Hawkes Bay readers can go along to the Havelock North Function Centre on Tuesday 1 September from 7.00pm to 8.30pm to hear Housing Minister Dr Nick Smith and other experts on this topic. For roadshows in other regions, keep an eye on the Housing New Zealand website.
 
Buying a house is a significant investment, and anyone planning to use their KiwiSaver savings or applying for the HomeStart grant should get to know the rules early on to find out if they are likely to qualify. The full HomeStart grant requires regular contributions to KiwiSaver for at least 5 years, so long term planning is needed. As this week is Money Week, what better time to write down your short, medium and long term money goals and calculate how you can achieve them.

As published in the HB Today 31 August 2015
 
Shelley Hanna is an Authorised Financial Adviser FSP12241. Her disclosure statement is available on request and free of charge by calling 06-8703838 or go to www.peak.net.nz. The information contained in this article is of a general nature and is not personalised. Send your KiwiSaver questions to shelley.hanna@peak.net.nz