Paying off a home loan can feel as if you're locking yourself into years of repayments and uncertainty. But we all need homes to live in, and that's why KiwiSaver exists in the first place, to help people get into new homes all the sooner.
So, if you want to avoid paying for the entire cost of your mortgage deposit, it might be a good idea to use some of your KiwiSaver. Or, if you're new to KiwiSaver, maybe it's time to consider how much you could save on a future mortgage if you began to save now.
We can't decide for you, but we can give you some tips and pointers.
Can you put down a deposit of at least 5% on the price of the house? Because you'll need to prove you can begin repayments. Even then, for some lenders and banks, you'll be paying higher than average interest until you can start with a deposit of 20%.
I've been contributing to KiwiSaver for a while.
Has it been at least three years? That means at least three years' worth of full-time contribution, at minimum wage (which can be broken up — it doesn't have to be consecutive years). If you withdraw funds within that time (say, six months' worth of KiwiSaver) that sets you back, by about six months.
It seems a long wait if you're already set on a place you want, but it's for a good cause. Because if you take money out too soon, you won't have allowed yourself time to save.
Another point to note is that this waiting period counts for self-employed or non-employed people. If you've got more than one source of income, you need to be contributing from both.
After three years of contribution, you can take out everything you've saved. However, KiwiSaver requires that you leave at least $1000 in your savings after withdrawal.
How do I grow my account?
Changing your contribution rate is the easiest way to put more money into that KiwiSaver.
What's my rate of contribution?
It's easy to sign up for a KiwiSaver without really knowing about it. Perhaps your employer slipped a form in when you first signed onto your job and set you on the minimum contribution rate.
Legally, they have to match your KiwiSaver contributions, at least up to the minimum rate. So, it pays for them to sort it out early, to set the amount they want.
If you're self-employed or contracting, it's a little different — your employer doesn't have to contribute, so it's up to you to sort out your own KiwiSaver.
Is there anything else for me to do?
If you're thinking about getting that mortgage and want to reduce your interest rate, it could be a good idea to up the amount you pay into KiwiSaver.
There are several options to choose from, paid out of a percentage of your wages. These are 3%, 4%, 6%, 8% or 10%. You can also contact your provider to set you up at a different rate if you'd like to contribute more.
We can't tell you which rate to pick — it all depends on what you can afford. So, if you're shopping for different KiwiSaver providers, check their sites for online calculators.
Why should I care who sorts my KiwiSaver?
Your KiwiSaver isn't precisely a savings account — it's more like an investment. This means that the amount of interest you can earn changes depending on who your provider is.
We have a whole blog about how to switch out your KiwiSaver provider and why you might want to make the change. In short, every provider uses a different saving 'strategy', depending on the goals you want to set. This doesn't change your overall percentage but could earn you more interest in the long run.
Anything else I should know?
Did you know you can get extra cash when withdrawing your KiwiSaver for a home purchase?
There are two sums of money to be aware of here; First Home Grants and deposit subsidies.
If you've had KiwiSaver for at least three years and have kept putting in cash regularly, you could get between $5,000-10,00 for a first home (depending on whether it's a new or existing build).
If it's a second home you're after, don't panic — you might be able to get something for that too.
You should check out your eligibility for the grant scheme online. There's a price cap on housing and other income/debt requirements so that you may find yourself in the cut off bracket. But it's worth trying, as it could save you a lot on a deposit.
Once you hit the third year of KiwiSaver, you can get $1,000 for each year you contributed.
So that's 3 X $1000 or $3000 the first time around, $4000 the next, etc.
There are a lot of reasons to sign up for KiwiSaver. Putting aside a little each week reduces what you need for a mortgage deposit and pays less interest overall.
If you want to save quickly, one option is to increase your KiwiSaver contribution to a higher amount. Another is to switch your provider for potentially higher returns on your KiwiSaver interest rate.
Best of all, there are grants and subsidies, which you can only get if you're a regular at contributing to KiwiSaver. The longer you do it, the more subsidies will contribute — so make sure you factor that into your final budgeting calculations.