The Importance of Withdrawing KiwiSaver for Your First Home Purchase

Navigating the path to homeownership in New Zealand can be both exciting and daunting, especially for first-time buyers. One of the most significant advantages available to these prospective homeowners is the ability to withdraw funds from their KiwiSaver accounts to assist with purchasing their first home. Understanding the importance of this option is crucial, as failing to take advantage of it can have long-term financial implications.

KiwiSaver: A Brief Overview

KiwiSaver is a government-backed savings scheme designed to help New Zealanders save for retirement. It allows individuals to automatically contribute a portion of their income (as allocated by the individual of between 3% to 10% of their income), which is then supplemented by employer contributions and government incentives. While KiwiSaver is primarily aimed at retirement savings, it also offers specific provisions for first-time homebuyers, making it an invaluable resource for those entering the property market.

Why Withdraw KiwiSaver for Your First Home?

1. Access to Significant Funds: For many first-time buyers, saving for a deposit can be one of the biggest hurdles. KiwiSaver allows you to withdraw your savings (and any government contributions) to help with the deposit for your first home. This can provide you with a substantial financial boost, making homeownership more achievable.

2. Reduced Financial Pressure: By utilising your KiwiSaver funds, you may be able to reduce the amount you need to borrow. A lower mortgage amount not only makes your monthly repayments more manageable but also decreases the total interest paid over the life of the loan.

3. Building Equity: Owning a home allows you to build equity over time. By using your KiwiSaver to enter the housing market sooner, you can start building this equity, which can contribute to your long-term financial stability.

The Consequences of Not Withdrawing

Choosing not to withdraw from your KiwiSaver account when buying your first home means that you are effectively leaving a significant financial resource untapped. If you are hesitant or even unsure as to whether to withdraw your KiwiSaver funds we provide the following points to consider:

1. Delayed Homeownership: Without accessing your KiwiSaver funds, you may face longer delays in accumulating enough for a deposit, which can prolong your journey to homeownership. Given that property prices appear to increase over time, waiting could mean needing an even larger deposit down the line.

2. Increased Financial Strain: Without the help of your KiwiSaver, you may have to rely solely on personal savings or family support, potentially putting additional pressure on your finances. This could result in a larger mortgage, leading to higher repayments and increased financial stress.

3. Retirement Savings Locked In: KiwiSaver funds are primarily intended for retirement. If you do not withdraw for your first home, your savings remain locked in until retirement age and/or serious illness. While saving for retirement is essential, having a home can also be a crucial part of financial planning, and delaying homeownership could limit your overall financial growth.

4. Missed Opportunities for Home Equity: Not investing in property at the right time can mean missing out on potential appreciation in home values.

Summary

Withdrawing from your KiwiSaver to assist in purchasing your first home could be one of the most financially savvy decisions you make. It offers not only immediate financial assistance in securing a property but also contributes to your long-term financial health. Conversely, opting not to withdraw could hinder your journey to homeownership and leave your retirement savings untouched until later in life.

For those looking to buy their first home in New Zealand, understanding the KiwiSaver withdrawal process is essential. Taking proactive steps to utilise this resource can open doors to homeownership and pave the way for a brighter financial future.

Please get in touch with our property team if you have any questions relating to KiwiSaver withdraws or you need assistance with a property matter.