KiwiSaver and Your First Home: What to Do Before You Sign, and After You Settle | NZ Legal

A joint article with Generate. Adam Siddall of NZ Legal has written the legal and conveyancing sections. Nathan Stanners, a KiwiSaver adviser at Generate, has written the sections marked with his name.

For most first home buyers we act for in Auckland, KiwiSaver is not a nice extra. It is the deposit. And a deposit funded from KiwiSaver needs a clause in the agreement that most people have never heard of, put there before the offer is signed.

This article is a joint one, and it is worth being clear about who is saying what. We are property lawyers. We have written the legal and conveyancing side: how the withdrawal works, what the agreement needs to say, and how the timing runs. We are not financial advisers and we do not advise on KiwiSaver. So the parts about what your money is invested in, and what to do with your KiwiSaver once the purchase is done, are written by Nathan Stanners, a KiwiSaver adviser at Generate. Those sections carry his name.

What the first home withdrawal actually gives you

A KiwiSaver first home withdrawal lets you take most of your KiwiSaver balance out and put it towards buying your first home. You can withdraw your own contributions, your employer’s contributions, the Government contributions, and the investment returns on all of it.

Two things stay put. You must leave at least $1,000 in your account, and any money you transferred in from an Australian complying superannuation scheme cannot be withdrawn for a first home.

There is no income cap and no purchase price cap on the withdrawal itself. That surprises people, because the First Home Loan (a separate Kāinga Ora-backed low deposit lending scheme) does have thresholds. They are different schemes with different rules.

One thing worth clearing up, because we are still asked about it regularly: the First Home Grant closed to new applications on 22 May 2024 and has not been replaced. The KiwiSaver first home withdrawal is a different thing entirely, and it is still available.

One thing we cannot help with is how much will actually be sitting there on the day you need it. That depends on how your KiwiSaver is invested, which is Nathan’s area rather than ours.

Most people need it for the deposit, not settlement

You can use the withdrawal for the deposit rather than waiting until settlement. That is not at the provider’s discretion. You specify on the application that the money is for the deposit, and the provider releases it on that basis.

The timing works, as long as you are quick with the paperwork. In our experience the funds land in our trust account around 6 to 8 working days after the application goes in. A typical Auckland agreement has a conditional period of around 10 working days, with the deposit payable once the agreement goes unconditional. So the two line up, provided you are onto the withdrawal promptly.

If a vendor is pushing for a short conditional period, or a deposit payable earlier than usual, tell us before you sign. That is a term we can usually negotiate, and it is only negotiable while you are still negotiating.

Before you sign: the deposit clause your agreement needs

This is the part almost nobody knows about, and it is the reason to talk to us before the offer goes in rather than after.

KiwiSaver money is your retirement savings, and it does not lose that character just because it is being used as a deposit. So when the deposit is funded from a KiwiSaver withdrawal, the money needs to be protected in a way an ordinary deposit does not. In practice that means two things: the deposit is held as stakeholder rather than released, and the vendor’s lawyer gives an undertaking to refund it if settlement does not happen through no fault of yours.

That protection does not appear on its own. It has to be written into the agreement as a further term, and it has to be there before the agreement is signed. Once it is signed, you are asking the vendor for a favour rather than agreeing a term.

Here is the clause we use. You are welcome to take it to your own lawyer, or to us:

A deposit clause is a thirty second conversation before you sign, and a very difficult one afterwards.

Two things that clause does. It keeps your KiwiSaver money sitting in a trust account as stakeholder instead of being paid out to the vendor or released to the agent, and it gets you a written undertaking that the money comes straight back to you if the deal does not complete for a reason that is not your fault. Without it, your retirement savings are sitting in someone else’s hands with nothing in writing about how they come back.

The eligibility rules, in short

To make a first home withdrawal you generally need to show that:

• you have been a KiwiSaver member for at least three years
• the property will be your main home, not a rental, an investment, or a holiday house
• you have not made a KiwiSaver first home withdrawal before
• you have never held an “estate in land” in New Zealand or overseas, subject to some specific exceptions

That last one has an important exception. If you have owned property before but are now in a similar financial position to a first home buyer, Kāinga Ora can make a discretionary “previous home owner” determination. That process sits upstream of your provider, so it needs to start early, well before you are making offers.

If your ownership history involves a company or a family trust, the answer is less obvious than it looks, and it is worth reading our separate article on KiwiSaver and company or trust ownership before you assume either way.

How the withdrawal works, step by step

Most buyers have not seen this process before, so here is the whole thing.

1. You apply to your KiwiSaver scheme provider, not to us and not to Inland Revenue. Each provider has its own form and its own supporting requirements. On that form you specify whether the money is for the deposit or for settlement. We can provide you with a link to the relevant provider withdrawal form.
2. You sign a statutory declaration confirming things like your first home status and that you will live in the property. That declaration is witnessed by a solicitor or another authorised witness.
3. We give your provider an undertaking. This is a formal promise from us as your lawyers that the money will be applied to your purchase, and nothing else.
4. The money is paid to our trust account, not to you personally.
5. We pay it out where it needs to go: to the vendor’s lawyer’s trust account as the deposit, held as stakeholder under the clause above and against their undertaking, or on settlement day as part of the total settlement figure.

Tell us at the start whether the KiwiSaver money is for the deposit or for settlement. It changes what we ask you for, when we need it, and what has to go into the agreement.

Where it fits in your conveyancing timeline

Working backwards, this is what a well-run timeline looks like when the deposit depends on KiwiSaver:

• Before you make an offer: confirm your eligibility with your provider in writing, get the KiwiSaver deposit clause into the agreement, and start the Kāinga Ora determination if you need one.
• The day you sign: we send you the withdrawal instructions and paperwork. Turn them around quickly and the rest looks after itself.
• Days 5 to 8: the funds land in our trust account.
• Going unconditional, around day 10: we take the vendor’s lawyer’s undertaking and pay the deposit across to be held as stakeholder.
• Settlement: any balance of the withdrawal forms part of the settlement figure.

We handle all of this alongside the rest of the conveyancing as a matter of course. The two things we need from you are the paperwork back quickly, and the chance to look at the agreement before you sign it.

After settlement: your KiwiSaver starts again from close to zero

This is the part almost nobody plans for, and it is why we wanted Nathan involved rather than writing this alone.

The day after settlement you own a house, and your KiwiSaver balance is $1,000 plus whatever has come in since. Everything you spent a decade building is now equity in the property. That is exactly what the scheme is for, and it is a good outcome. But your KiwiSaver is now a very different account than it was a month ago, and the settings that suited you while you were saving a deposit may not be the settings that suit you now.

What you do about that is a financial question rather than a legal one, so we asked Nathan to take it from here.

A quick checklist

Before you sign anything

• Send us the agreement before you sign it, so the KiwiSaver deposit clause goes in as a further term
• Confirm your eligibility with your KiwiSaver provider in writing
• If you need a Kāinga Ora previous home owner determination, start it before you make offers
• Tell us whether the KiwiSaver money is for the deposit or for settlement
• Check the conditional period and the deposit date are realistic before you agree to them
• Return the withdrawal paperwork we send you within a day or two, not a week
• Diarise a KiwiSaver review with Nathan for a few months after settlement

Talk to us before you sign

The withdrawal itself is straightforward. The part that is not, and the part you only get one shot at, is the agreement. If you are buying your first home in Auckland and KiwiSaver is your deposit, send us the agreement before you sign it. We will put the deposit clause in, check the conditional period and deposit date stack up, and send you the withdrawal paperwork the day you are under contract.

That is our half of it. The other half is the KiwiSaver account itself, which is where Nathan comes in.

Buying your first home efficiently takes a team, both legal and financial. Get the right people around you, make the right decisions early, and you will give yourself the best chance of turning your first home goal into reality, without losing sight of the retirement that comes after it.

Who wrote what

The legal and conveyancing sections of this article were written by NZ Legal, a specialist property law firm in Parnell, Auckland. We act for first home buyers on the purchase itself: the agreement, the deposit clause, the withdrawal undertaking, and settlement.

The KiwiSaver sections, each marked with his name, were written by Nathan Stanners, a KiwiSaver adviser at Generate.

Contact NZ Legal to get started — fill out our quick contact form and we will be in touch within one business day.

Sources

1. KiwiSaver Act 2006, Schedule 1Sets out the first home withdrawal, including the three-year membership requirement and the $1,000 minimum balance.
2. Inland Revenue, Getting my KiwiSaver savings for my first homeWhat can and cannot be withdrawn, including funds transferred from an Australian complying superannuation scheme.
3. Kainga Ora, KiwiSaver first-home withdrawalAdministers the discretionary previous home owner determination.