Using your KiwiSaver as a first home deposit in Queenstown
For a lot of first home buyers in Queenstown, KiwiSaver is the biggest helper available to get a deposit together. Property prices here sit well above the national average, so understanding exactly how your KiwiSaver withdrawal works (and whether you should use all of it) can make a real difference to your buying position.
Here's what you need to know.
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Can you actually use KiwiSaver to buy in Queenstown?
Yes. If you've been contributing to KiwiSaver for at least three years, you can withdraw some or most of your KiwiSaver savings to put towards your first home. This applies whether you're buying in Queenstown, Lake Hayes, Jack’s Point, Arrowtown, or anywhere else in Central Otago.
To be eligible, you generally need to:
- Have been a KiwiSaver member for at least three years
- Be buying a home to live in yourself (aka not a rental or investment property)
- Not have owned property before (with some exceptions for previous owners in certain circumstances - if this is you, it’s worth checking your specific situation with an adviser)
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What can you actually withdraw?
You can withdraw your own contributions, your employer's contributions, and the returns earned on both. The one part you can't touch is the $1,000 government kickstart contribution, if you received it.
Most people are surprised by how much this adds up to once employer contributions and investment growth are included, particularly if you've been contributing regularly for several years.
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How does the process actually work?
You'll need to apply through your KiwiSaver provider, not your bank. Processing can take a few weeks, so this is something to start well before you're at the stage of putting in an offer on a property… not after! Your KiwiSaver withdrawal typically needs to be used towards the deposit at the point of settlement, so timing it correctly alongside your home loan approval really matters.
This is exactly the kind of thing where getting your finances sorted early (yes, that’s before you're actively looking for a home), makes the whole process smoother.
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Should you withdraw all of it?
It’s automatically assumed that the best thing to do is use all of your available KiwiSaver funds towards a home, right?
If you genuinely need the full amount to get over the deposit line, then yes- that's exactly what it's there for, and using it to buy your first home is an intended use of the scheme. But if you have enough savings elsewhere to cover your deposit, or you only need part of your KiwiSaver balance to get there, it's often worth leaving the rest in.
Here's why. Your KiwiSaver balance is already invested and compounding over time. Pulling out more than you need interrupts that compounding and can leave you financially worse off over the long run, especially if you're young and have decades of growth ahead of you in your fund. For example, putting your KiwiSaver funds towards a first home saves you around 6% compounding interest. If you leave your KiwiSaver in a high performing fund, you could be returning 10% - a huge difference!
A simple way to think about it: only withdraw what you actually need to make the purchase work and leave as much as possible in your KiwiSaver fund.
If the difference between using your full KiwiSaver balance and using only part of it is the difference between buying a home now or waiting years to save the rest, then using it all is absolutely the right call - getting into the property market is generally the priority. But if you have the flexibility to leave some in, it's worth having that conversation before you withdraw more than you need. We can help you run the numbers to see what best makes sense for your situation. If you do need to withdraw some or all of your KiwiSaver, then we can come up with a plan to make those losses back up over the long term so you win both with your home AND your retirement fund.
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A quick example
Say you need $200,000 for your deposit and you have $130,000 in savings plus $100,000 available in KiwiSaver. Rather than withdrawing the full $100,000, you'd only need to draw down $70,000 to cover the gap, leaving the remaining $30,000 in your KiwiSaver account to keep growing. Over time, that difference can add up to a huge amount in your retirement savings (often hundreds of thousands of dollars) simply by not withdrawing more than the deposit actually required.
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KiwiSaver is one of the most useful tools available to Queenstown first home buyers, but "how much to withdraw" is just as important a question as "can I withdraw." Work out the minimum you actually need for your deposit first, rather than assuming you should withdraw everything available - your future self, and your KiwiSaver balance, will likely thank you for it!
If you're weighing up your deposit options in Queenstown or Central Otago, get in touch with the Loan Market Queenstown team. We can help you work out exactly how much of your KiwiSaver you need to draw on, and structure the rest of your deposit and lending around it.
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