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Getting a Deposit Together

There is more than one way to get a deposit together, below are some examples.

 

A great way to get your deposit together is with a regular savings payment.
Set up a regular payment to transfer money from your transaction account through to your savings account. Aligning this payment with your pay cycle will make this easier.

If you can establish a good savings history it will work in your favour when you are ready to apply for your loan.

You may be eligible to withdraw some of your KiwiSaver contributions to use towards the purchase of your home.

This is called 'first home buyer withdrawal' for first home buyers, or 'second chance home withdrawal' for those who have owned a house in the past but did not benefit from the purchase and are essentially in the same position as a first home buyer.


Making a first-home withdrawal
You must have been a KiwiSaver member for three or more years. You can only withdraw money to purchase your first home - not an investment property.

What can be withdrawn?
If you're eligible, you may be able to withdraw some or all of your KiwiSaver savings (except for the $1,000 kick-start) to put towards purchasing your home.

  • Your members contributions
  • Any employer contributions (voluntary and compulsory)
  • Any returns on investment(s) received
  • Any member tax credits

How to apply for a first-home withdrawal
You'll need to apply to your KiwiSaver provider if you want to make a first home withdrawal.

The KiwiSaver first home withdrawal will be part of the money you put into your first home, but until 1 June 2015, it 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.

If your application for your first home withdrawal is approved, your KiwiSaver savings are withdrawn and paid directly into your lawyer or conveyancing practitioner’s trust account to pay the vendor on settlement day. Approval and payment can take up to ten working days.

After 3 years of contributing to KiwiSaver, you may be entitled to a KiwiSaver HomeStart grant. The grants are administered by Housing New Zealand and will be paid to your solicitor.

The two HomeStart grants are:

  • For purchasing an existing home, the grant is between $3,000 and $5,000 based on $1,000 each year of KiwiSaver membership.
  • For building or purchasing a new home, or for purchasing land to build a new home on, the grant is, in effect doubled to, $2,000 per year of membership in the scheme, up to a maximum of $10,000 for five years for each member.

There are maximum values of grants payable for the purchase of a single dwelling, regardless of the number of eligible purchasers:

  • $10,000 for the purchase of an older/existing property
  • $20,000 for the purchase of a new property

To be eligible for a KiwiSaver HomeStart grant you must:

  • Have been contributing the required minimum amount to KiwiSaver for at least three years
  • Be 18 years or over
  • Be purchasing or building your first home
  • Have a deposit that is 10% or more of the purchase price, including the addition of the grant

Note: Income and house price caps will apply. If you've owned a home before, in some circumstances you may still be eligible for a HomeStart grant. Housing New Zealand will need to determine that you are in the same financial position as a first home buyer.

This is when you are given a lump sum payment towards your home deposit. You will be asked to show proof of where the money came from, and that there is no requirement to pay it back. If you are being lent the money, please read the section "help from your family" as the conditions will be different.

  • You may be asked to show evidence of a savings history and that you have saved some of the money yourself
  • It is important to seek legal and tax advice

Aside from gifting, there are other ways your family could help you into your first home.

There are drawbacks too, here are a couple of options:

Using a family member's property as security for the deposit

  • This means they become a guarantor and provide their own home as security.
    Your family member's property is potentially at risk if you do not make your loan repayments.
  • As the borrower, you are primarily responsible for servicing the repayments on the loan, but if you default the guarantor may be asked to make the payments on your behalf
  • We strongly recommend you and your family seek independent legal advice before entering into this arrangement. That way you will all be aware of the benefits and risks

Family members providing help toward your deposit

  • If your family loan you the deposit, you will need to be able to make the repayments on both your loan, and the repayments for the deposit
  • Your family may take out a loan over their property to help you with the deposit, so we need to make sure that you can service both loans
  • Again we strongly recommend you and your family seek independent legal advice before entering into this arrangement. That way you will all be aware of the benefits and risks
The information expressed above is provided for general information purposes only, with the express disclaimer of responsibility and it does not constitute an offer of finance from NBS.