Many Kiwis dream about owning their own home, but not everyone dreams of their first home purchase being an existing property. It is becoming an increasingly popular option for first home buyers to have their sights set on purchasing land and building. Luckily, KiwiSaver includes land purchases in the First Home Withdrawal scheme, meaning you can still use your KiwiSaver to help you get on the property ladder even if you are planning to buy land.
However, there is a lot to consider if you plan to use your KiwiSaver to help purchase your first home. It’s important you understand the eligibility criteria for who can withdraw and know the conditions of buying land using KiwiSaver. Additionally, you should be aware of the extra incentives available to first home buyers and what you can do to make sure you are optimising your KiwiSaver investment.
National Capital is here to help you answer all your questions regarding how to use your KiwiSaver, but today we will specifically look at using your KiwiSaver to buy land. So let's dive in and first look at the basics: who is eligible to withdraw their KiwiSaver for their first home deposit?
Am I eligible for KiwiSaver's First Home withdrawal?
To be eligible to withdraw your KiwiSaver for your first home deposit, you must meet a few requirements.
Below is a checklist of the eligibility criteria you must meet to qualify for KiwiSaver’s First Home Withdrawal Scheme.
If you meet all the requirements in this checklist, then fantastic! You are one step closer to reaching your dream of purchasing your first home. But you may still be wondering how you use your KiwiSaver to buy land rather than an existing home?
Using KiwiSaver to Buy Land
KiwiSaver allows first home buyers to withdraw their savings for both existing homes and land purchases. If you plan to buy land with your KiwiSaver, you must comply with the same eligibility requirements outlined above. A key requirement is that you must be purchasing land in New Zealand with the intent of then building your first home on the property. The home you build can not be an investment property. Meaning you must be planning on living in the property once the build is complete. There are often many questions regarding the timeframe the property must be built. The good news is KiwiSaver has set no restrictions on when the build must be started or completed. However, a concept plan may be required when requesting the withdrawal.
It is also important to know that you can use your KiwiSaver to purchase a House and Land package. Here is a quick overview for those unaware of what a House and Land package is and how it differs from a ‘Buy and Build’ option.
House and Land package
A House and Land package is where you are able to buy a section of land that has predetermined building plans for a fixed price. You are essentially buying the land as well as the house-build directly from the building or development company. A large majority of House and Land packages are development housing, offering a specific selection of house designs. This may seem like an attractive option for those looking to buy land and build but don't want to deal with the time-consuming and nitty-gritty aspects of designing and building from scratch. However, for those who are ready to take on a challenge and custom build a house, then a House and Land package isn't likely to be the best fit. Whether you choose a Home and Land package or choose to buy and build, the good news is that you can still use your KiwiSaver to help with your deposit (assuming you comply with all of the other requirements).
Considerations when using your KiwiSaver to buy and build:
It's important to note that if you already own or have been gifted the land you want to build on, you won't be able to use KiwiSaver to help contribute to the build. Essentially this is because KiwiSaver views a first home purchase being either property or land, which means owning land is viewed as owning a home. If this were the case, it would affect your eligibility to withdraw your KiwiSaver as you would no longer meet the requirement of the purchase being your first home.
But what if I was planning on using my savings to buy land and then wanted to use KiwiSaver to build my house?
Unfortunately, it is not possible to use personal savings to buy a section of land and then use your KiwiSaver to build a house. This is due to the purchase of land being viewed as a first home in the eyes of KiwiSaver. Meaning you would no longer meet the eligibility criteria needed for KiwiSaver's First Home Withdrawal. However, simply changing your plan to use your KiwiSaver to purchase the land and use your savings for the build would mean you'd comply with the eligibility criteria. It’s important to understand the eligibility criteria so you don't get caught in a situation where you can no longer use your KiwiSaver to fund your first home.
What if I have owned a house in the past but have since sold it. Am I able to use KiwiSaver for my house deposit?
Generally no, you will not be eligible for KiwiSaver's First Home Withdrawal as you have already owned your first home. However, there is some exception. If you are in a similar financial position to a first home buyer, you may be eligible for the KiwiSaver First Home Withdrawal Scheme. If this is something you want to look into, head over to Kainga Ora. This link will take you to KiwiSaver's previous homeowner application form. This application will determine whether you are financially similar to a first-time buyer and make the call on whether you qualify for withdrawal.
So when can I not use my KiwiSaver when buying a home?
Generally, you cannot use your KiwiSaver to purchase your first home if:
First Home Grant
You may have heard about the NZ government offering help to first home buyers through their KiwiSaver in the form of a First Home Grant. The First Home Grant essentially provides first home buyers free money from the government. Now, who doesn't like the sound of that! To make sure you are eligible for this, you need to make sure you have been contributing at least 3% of your income to your KiwiSaver for the last three years. By doing so, you will be able to receive the First Home Grant.
How much can I receive from the First Home Grant?
Unfortunately, they don't spin a wheel with values ranging from $50,000 to 1 million when deciding how much you will receive from the grant but any extra help when buying your first home goes a long way. When purchasing an existing property or an older home, the First Home Grant can offer a maximum of $5,000. If there are two or more eligible buyers, you can receive a maximum of $10,000. If you are looking at buying a new home (property bought off the plans or land to build a new home), then the First Home Grant can offer up to $10,000 or up to $20,000 when there are two or more eligible buyers. To be considered a new home, the house must have a code compliance certificate of fewer than 12 months old before the First Home Grant application date.
The amount you receive from the First Home Grant is determined by how long you have contributed to your KiwiSaver, so keep this in mind when planning your investment timeframe. To ensure you receive the maximum amount offered, you need to contribute to your KiwiSaver for five years or more. This is because the grant offers either $1,000 (for an older property) or $2,000 (for a new property) per year you contribute. There is a maximum of $5,000 or $10,000, depending on the age of your property.
Is there anything else I can do to optimise how much I have for my first home deposit?
Not all KiwiSaver providers and funds are the same. Being in the wrong fund may mean you miss out on thousands of dollars that could have contributed to your first home deposit. Recognising that providers and funds are different is an important step in working towards optimising your KiwiSaver investment for your first home. When working out which provider and fund are the best for your specific investment goal, many variables need to be considered. Such variables include when you plan to use your KiwiSaver, how much you plan to need and your risk tolerance.
The critical thing to remember here is that KiwiSaver providers and funds are not a one-size-fits-all system. In saying this, many of us are unaware of whether they are in the right fund and with the right provider. Figuring this out can be time consuming and complex as there are almost over 30 KiwiSaver providers and 250+ funds available. Comparing your current KiwiSaver to all of the options available is a mammoth task for anyone! However, this is what our team at National Capital specialises in. At National Capital, we use our expertise to analyse the many providers and funds available so that we can give you advice on how to optimise your KiwiSaver investment. Our advice considers your personal situation and savings goal to make sure the advice we give is specific and accurate to you!
Want to take the next step to help reach your first home dream?
National Capital wants to help you get there. Our free Healthcheck is a quick and easy way to find out if you are on track to meet your first home deposit goal. By filling out our Healthchack you will be sent a detailed report comparing your current provider and fund type to one that is better suited to optimise your investment. Our team at National Capital recognises that buying your first home, whether that is a preexisting property or buying land to build, can be an exciting as well as overwhelming and stressful time. We want to make sure you are in the best position financially so that you can focus on finding your dream home. Let us help you take the next step in reaching your dream of buying your first home. Complete our KiwiSaver Healthcheck now.