A KiwiSaver's home-owning goal is a reality
KiwiSaver is three years old, and the promise of a helping hand to aspiring home-owners saving in KiwiSaver is now a reality.
Maria Madden* (26) has plans to buy her own house in the next year. Thanks to KiwiSaver, she’s closer to achieving her goal.
KiwiSaver supports the Kiwi dream
Like many young Kiwis, Maria always dreamed of owning her own home. But with house prices rapidly rising and the required deposit increasing, she wondered if it would ever happen. She’d heard about the benefits KiwiSaver offered first-home buyers and realised just how generous KiwiSaver was to people entering the property market.
Amazing benefits
“KiwiSaver was a quick way to grow my savings,” says Maria. “I don’t just get the money I put in; it grows from employer contributions and the $1,000 government kick-start and yearly tax rebate. And that’s before I start earning an investment return. After three years, I can withdraw the contributions my employer and I made to use as a house deposit. Hopefully, I’ll be eligible for a tax-free government subsidy.”
The best of both worlds – a house and retirement
Maria was already saving for retirement with a work super plan but decided to focus on buying a house by also joining KiwiSaver and putting in the maximum contributions. “It’s really flexible for first-time house buyers. Later on I can stop my contributions and focus on paying the mortgage. I get the best of both worlds – the retirement savings don’t stop because I can leave the government contribution in KiwiSaver to keep growing.”
If Maria can’t afford regular contributions after she buys a house, she can make a lump-sum payment to get the tax rebate. This means her investment will keep growing by just over $2,000 annually.
Plan in advance
Waiting at least three years to take advantage of the house-buying benefits isn’t a problem for Maria. Having worked out what she needed to save, and how long would it take she knows it’s possible.
“I need a few years to get a deposit together and to clear my credit card debt. KiwiSaver is only part of my savings, but it really does help. I’m glad I started planning early – it’s worth the hard work to have my own house and stop paying someone else’s mortgage!”
KiwiSaver first-home buyer’s benefit
There are two benefits for KiwiSavers who have been members for at least three years, and are about to buy their first home:
- The first home withdrawal lets members withdraw contributions they and their employer/s have made, in order to buy their first home.
- The first home deposit government subsidy is a one-off payment of up to $5,000 administered by Housing New Zealand.
How much can KiwiSaver contribute to my house deposit in five years?
Let’s take Anna, a typical young professional. Anna is 28, earns $50,000 per annum and is paid fortnightly. This table shows how much she can save in KiwiSaver over five years, to put towards a deposit for her first house.
|
Anna’s contribution level |
Saving in year 1 |
Saving in year 2 |
Saving in year 3 |
Saving in year 4 |
Saving in year 5 |
|
2% |
$2,000 |
$4,000 |
$6,000 |
$8,000 |
$10,000 |
|
4% |
$3,000 |
$6,000 |
$9,000 |
$12,000 |
$15,000 |
|
8% |
$5,000 |
$10,000 |
$15,000 |
$20,000 |
$25,000 |
Savings include your contribution plus your employer’s contributions at 2%. Savings do not include wage increases, investment returns and Government contributions (Member tax credits and government kick-start are not eligible for your first home withdrawal).
As the table shows, the higher the KiwiSaver contributions and the longer the time, the more Anna’s savings accumulate. And a bonus of KiwiSaver is Anna can boost her savings because she gets an extra 2% from her employer. For example in five years Anna would have saved $25,000 - $5,000 of which is employer contributions - which she could withdraw for her first house.
Some useful resources if you’re interested in getting your first home
Remember, when buying a house, having a deposit of 20% of the purchase price is ideal. So, depending on how much you would like to spend, you need to start planning early and you may need to have other savings as well as KiwiSaver.
To get a foot in the door of your own home, it’s a good idea to set up a budget and get into the habit of saving regularly. There are some great resources to help you with budgeting and answer your questions on KiwiSaver and mortgages on sorted.org.nz.
*Name has been changed