HomeStart Grants – Who is eligible and what are the benefits for Kiwisavers?

13 March, 2018 | Wade Hansen

 KiwiSaver HomeStart Grants are grants of money that eligible first home buyers can apply for as contributions to the purchase of their first home.

HomeStart Grant money comes directly from the NZ Government (via Housing New Zealand) and NOT from your KiwiSaver provider and therefore not from your KiwiSaver account. HomeStart Grants are given in addition to any KiwiSaver First Home Withdrawals.(link)

Home Start Grant Eligibility

In order to be eligibile for the HomeStart grant, you will need to:

• have been contributing the minimum income percentage for at least three full years to a KiwiSaver Scheme, complying fund or exempt employer scheme
• Have not previously owned any property (although there are exceptions – see later in the article)
• Earn under certain income caps – a salary limit of $85,000 for singles and $130,000 for couples
• Live in the property as your principal place of residence (it cannot be used as a rental)
• Have a minimum of 10% deposit. (The 10% deposit can include funds withdrawn from your KiwiSaver, savings etc, but cannot include a loan from family members or a guarantee)
• Purchase property under the price caps.

For more eligibility information including how asset values apply, visit Housing New Zealand’s eligibility checklist. In addition, first home buyers must intend to purchase a property in their personal name(s), rather than that of a family trust or other shared fund.

Exceptions – Previous Home Owners

If you have previously owned property, but do not own property now, you may still be eligible for a HomeStart Grant.

You will need to be deemed by Housing New Zealand as being in the same financial position as a first home buyer. To find out if you qualify, simply fill in the extra section on realisable assets in the standard HomeStart Grant Application Form.

Regional price caps for HomeStart grant purchases

To be eligible for a HomeStart Grant you will need to purchase a property below the regional caps set on purchase prices, which vary by region to reflect property values.

When buying land only, the cost of the land added together with the cost to build the house must be lower than the property cap for that region.

Regional limits are set out as follows:

 $600,000 (existing properties) and $650,000 (new builds) for Auckland

 $500,000 (existing properties) and $550,000 (new builds) for Christchurch City, Hamilton City, Hutt City, Kapiti Coast, Nelson City, Porirua City, Queenstown Lakes, Selwyn District, Tasman, Tauranga City, Waimakariri, Wellington City, Western Bay of Plenty and Upper Hutt

 $400,000 (existing properties) and $450,000 (new builds) for the rest of New Zealand.

How much can you get?

The KiwiSaver Home Start Grant is in addition to any funds you withdraw from your individual KiwiSaver Fund, and the amount you will receive is not dependent on how much you have saved (as long as you meet the eligibility criteria). How much you receive is affected by how many years you have been contributing to KiwiSaver.

As the Government wants to incentivise the building of additional homes, the grant is larger if your first home is going to be a “new build” (compared to buying an existing house).

For the purchase of an existing home, the new grant offers a minimum of $3000, and up to a maximum of $5,000 to individuals and $10,000 to couples. In the case of building or purchasing a brand new home, this doubles to a minimum of $6000, and a maximum of up to $10,000 for individuals and $20,000 for couples.

Bank Deposit vs Purchase/Real Estate Agent Deposit

Most properties require a 10% deposit to be paid directly to the person selling the property via the real estate agent on the date the sale goes unconditional (or on Auction day). This is known as the purchase or real estate agent deposit (and is different from the “deposit” required by a bank). A KiwiSaver HomeStart Grant cannot be used to pay this deposit as the funds will not be received until settlement day. You will need to organise alternative funds to cover this.

What qualifies as a “new-build”?

The HomeStart Grant recognises a new build as any of the following:

• A vacant residential section on which a new dwelling will be built within specified time frames – there must be a fixed price build contract included in the application
• A house and land package purchased from plans
• A new apartment built from plans
• A newly built dwelling that has received its building code compliance certificate less than six months before the buyer’s application. This does not mean a code compliance certificate issued for renovations/additions.
• The HomeStart grant CANNOT be used to fund building a dwelling on land that is already owned by the KiwiSaver member.
• If you are buying land, a house and land package or an apartment off the plans, a signed fixed price building contract containing clear construction start and end dates (and a sunset clause) must accompany the application.
• The purchase price of the land + the cost of the build must be less than the regional property cap.

For example
If you are buying a section in Henderson Valley for $199,000, the fixed price building contract would need to be for $451,000 or less.

Applications

The HomeStart grant is administered by Housing New Zealand, and applications need to be made to Housing New Zealand (NOT to the KiwiSaver fund provider)

You as purchaser can make this application yourself on the Housing New Zealand website at www.kiwisaver-homestart.co.nz

However, if the property is a “new build” it is a good idea that the your solicitor reviews the agreements and contracts with a mind to the requirements of the application (prior to you signing and contracts)

The application form

• Each person applying for a HomeStart Grant needs to complete an individual application form
• If the property is being purchased by more than one person (i.e. they are listed on the Sale and Purchase Agreement), but the other persons are not applying for the HomeStart grant, the full names of all the purchasers, and evidence of their income earned over the previous 12 months will need to be attached to the application

Supporting Documents

In addition to the application form, you will need to supply the following supporting documents:

• Certificate of earnings for the last 12 months (IRD)
• KiwiSaver contribution statement (IRD)
• Birth certificate, passport or drivers licence
• Two months payslips
• Agreement for sale and purchase
• Signed fixed price building contract, including sunset clause and occupation date details (for bare land purchases)
• Evidence of minimum 10% deposit

Further details on how to access this information can be found here 

How long do applications take?

We recommend that you apply for pre-approval. Pre-approvals are valid for 6 months, after six months you will need to re-apply.

If you have pre-approval, you need to allow a minimum of 10 working days prior to settlement date.

Without pre-approval, Housing New Zealand requires a minimum of 20 working days (4 weeks) to process applications.

It is therefore imperative that all agreements relating to the purchase are negotiated in regards to these timeframes (finance conditions for example)

Key Points to Note – What Can Go Wrong?

The most important thing to be aware of when using a KiwiSaver HomeStart Grant is to be careful with the dates in your agreement and when you are applying for the grant.

If the funds have not arrived from Housing New Zealand in time for settlement, they cannot be used towards the purchase. In this situation you cannot get a loan from somewhere else to cover the shortfall (for settlement) and then use the HomeStart Grant to repay that shortfall loan. You may end up forfeiting your right to the HomeStart Grant funds forever.

If the KiwiSaver Grant funds have not arrived from in time for settlement you are still legally obligated to continue with the purchase. You will need to cover any shortfall, any delay in settlement will make you liable for settlement delay penalty fees and if you are not able to cover the shortfall, you will be liable for breach of contract.

How do you make sure it all goes right?

1) Apply for pre-approval
2) If you have pre-approval, allow at least 10 working days to satisfy the finance condition
3) If you do not have pre-approval, allow at least 20 working days to satisfy the finance condition
4) Allow at least 10 working days from the date the agreement goes unconditional until settlement date
5) Get your property lawyer to review the Agreement for Sale & Purchase BEFORE you sign, to ensure everything aligns with your KiwiSaver requirements.

What are you waiting for? These changes are great news for first home buyers, providing a greater range of options to reflect the many home owning aspirations of young New Zealanders. Visit Housing New Zealand’s HomeStart grant website for everything you need to begin.

If you would like to discuss any matters related to buying and selling residential property, please contact Property Lawyer, Wade Hansen on 09 837 6845 or at wade.hansen@smithpartners.co.nz