Most first home buyers’ savings are tied up in their Kiwisaver. Technically, you cannot use your Kiwisaver to pay the 10% deposit on the night of winning the auction.
Why?
This is because you need a signed agreement, a completed statutory declaration and your lawyer’s undertaking / certificate to be with your Kiwisaver provider before you can receive your Kiwisaver withdrawal to buy for your first home.
There are also strict working day limits to process your Kiwisaver withdrawal. You may also need up to 10 working days (even 15 working days if you have lived overseas) for your Kiwisaver withdrawal to be processed.
If your client wins the auction and signs the agreement in its standard form, they will need to pay a 10% deposit to the real estate agent’s trust account. This needs to happen immediately.
If the deposit is not paid as set out in clause 4.1, the vendor may cancel this agreement by serving notice of cancellation on the purchaser.
Unlike the non-auction form of agreement (which gives the purchaser three working days to pay the deposit), the purchaser will need to pay the agreed deposit straight away otherwise the seller can cancel the agreement and pursue the purchaser for other costs, damages etc.
WARNING DO NOT DO THIS - Borrow money from your parents and repay them with your KiwiSaver.
Watch out.
If your client suggests borrowing money from their parents and repaying them with the KiwiSaver, you will need to get this agreed with the KiwiSaver provider and the real estate agent in advance.
This will become a headache for everyone because the real estate agent will not want to release money they hold to exchange it for other money. The agent will be worried they may lose the deposit (their commission) and they will need to complete further AML on your parents or whoever is paying the deposit on your behalf.
KiwiSaver providers require your KiwiSaver money to go toward purchasing your first home, not repaying your parents who lent you money to pay the deposit. Even though your KiwiSaver effectively is being used to purchase your first home, it does not follow the strict process that the money is only used to purchase the first home.
Step 1 Sign a variation in advance
Step 2 Agree to pay $X amount on the night
Step 3 Agree to pay $Y amount when your client’s KiwiSaver arrives in their solicitor’s trust account.
We often help first home buyers navigate this common problem. We recommend they agree the following with the real estate agent in advance:
Hi [insert agent’s name]
We request the following is agreed as a variation to the auction agreement: Deposit
(a) $[insert amount you can bank transfer on the night] will be payable upon winning this auction; and
(b) $[insert amount from your KiwiSaver(s) - remember $1,000 will remain in each KiwiSaver account] will be payable within one working day following receipt of the purchaser(s) KiwiSaver(s) into their lawyer’s trust account.
Although 10% is generally considered the standard signing deposit amount, you can agree an amount less than 10% - so long as it is signed off in advance of the auction.
1. Using your KiwiSaver to pay the full deposit amount on auction night is impossible
2. KiwiSaver withdrawals can take up to 10/15 working days to process
3. Do not borrow money off your parents if you intend to repay them using your KiwiSaver funds
4. Contact a lawyer, make a plan and agree a variation in advance with the agent
