KiwiSaver deposit subsidy
From 1 October 2013 new regional house price caps, income caps and an additional deposit requirement came into effect in relation to the KiwiSaver deposit subsidy.
The changes are intended to support first-home buyers in the more expensive areas such as Auckland, Wellington, Christchurch and Queenstown, with house price caps increasing significantly, as follows:
- Auckland – $485,000
- Wellington City and Queenstown Lakes District – $425,000
- Christchurch City and Selwyn District – $400,000
- Thames/Coromandel, Tauranga City, Western Bay of Plenty, Hamilton City, Kapiti Coast, Porirua City, Hutt City, Upper Hutt, Tasman/Nelson and Waimakariri – $350,000
- Rest of New Zealand – $300,000
In line with those increases, the changes to the income cap will make more couples and families eligible than before:
- For one borrower they can earn $80,000 or less (before tax) in the last 12 months OR
- For two borrowers/buyers (or several buyers) they can earn a combined income of $120,000 or less (before tax) in the last 12 months.
The deposit requirement for KiwiSaver is that applicants must have a minimum of 10% of the purchase price. This deposit could include the money they can withdraw through the KiwiSaver savings withdrawal feature, the deposit subsidy amount they may be eligible for and any other suitable funds, such as savings, fixed and term deposits or funds already paid to a real estate agent. The deposit can also be gifted by a relative.
Buyers using their KiwiSaver facility need to be aware of the strict time frames regarding processing and the requirement of specific documentation to be provided to Housing New Zealand. One standard condition is that the buyer’s lawyer must provide confirmation of an unconditional agreement. Time restrictions mean that the KiwiSaver deposit subsidy cannot always be used as the deposit on the purchase price, which is generally paid to the agent when the agreement becomes unconditional. If the buyer intends to use their KiwiSaver contribution to pay the deposit, then the deposit clause in the agreement for sale and purchase must be amended to provide for either a fixed sum (being the amount they do have available without the KiwiSaver contribution) or, alternatively, making the deposit payable on receipt of the buyer’s KiwiSaver contribution
Therefore, when a buyer wants to withdraw their KiwiSaver Deposit Subsidy to complete a purchase, they should quickly make contact with their lawyer. To find out more on the deposit subsidy go to www.hnzc.co.nz/kiwisaver