KiwiSaver or a House?

Posted 4 years ago by Craig Pope

Kiwisaver or a house? This is a tricky question many younger and first-home buyers face when it comes to getting on the property ladder.

KiwiSaver is an incredibly powerful tool when it comes to financing your first home, but some experts have recently warned that using KiwiSaver to help purchase your first home could put your retirement at risk.

More than 100,000 people have used KiwiSaver to buy their first home since the scheme began in 2007, withdrawing more than $1.7 billion. Wellington first home buyers have had the highest withdrawal rate at $22,520 per person. After changes made to the scheme in 2015, people can now use their savings and tax credits to finance a deposit, as long as they leave the $1000 kick start in their fund.

If you are struggling to make sense of how to fund a deposit as a first home-buyer make sure you talk to a trusted mortgage adviser — but our advice is certainly to use KiwiSaver withdrawals to get on the property ladder if that’s what it takes. If you are young, you still have plenty of years ahead of you to build KiwiSaver for your retirement and build equity in a house at the same time.

The reality is that most people have no choice but to use KiwiSaver to pull together a deposit. Using these funds for reaching a 20 percent deposit can also deliver lower interest rates on your loan as you won’t be classed as a low-equity borrower. You also borrow less from the bank, meaning lower interest costs.

It’s also important to remember that having money in KiwiSaver is different to having savings in the bank — it can be difficult to predict how your fund will perform — for example KiwiSaver provider Growth Funds have more volatility and can fluctuate in value, making a loss or small gain in some years, and big returns in others.

And to answer the question of KiwiSaver or a house? Use your KiwiSaver first and foremost if you need to get on the property ladder, or to boost your deposit to 20 percent to save on loan costs. The earlier you get into a home the faster you can begin paying the mortgage and start growing that KiwiSaver balance again.

Contact us for help getting into your first home.

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