Tiny homes are all the rage these days for a number reasons, the price being the least of them.
Even the humblest of Kiwi abode has become more than most can afford, especially those living in Auckland, where average house prices have topped a $1m.
As well as being cute and efficient, tiny houses are simply more economical with kitsets priced below $100,000. For those priced out of the million-dollar club, they represent a chance at homeownership, within their lifetime.
So what are the rules when it comes to tiny houses and KiwiSaver?
The rules on using KiwiSaver to buy your first home, regardless of its size, are clear.
You’ll need to have been in KiwiSaver for the minimum of three years and it has to be your first home.
You can’t use any funds that have been transferred in from offshore superannuation schemes and if you have lived overseas and received member tax credits (MTCs) these are likely to be clawed back by IRD as you are not entitled to receive these credits while you reside offshore.
There are some exceptions to these rules, ie. if you previously owned a home (but no longer do), you did not use funds from your KiwiSaver account and you are in the same financial position as a first home buyer. So don’t count yourself out on that front. Check to see if you qualify by calling Housing New Zealand Corporation or checking out the eligibility criteria on their website here.
Importantly, if you are planning to use your KiwiSaver nest egg to buy a first home, you have to live there too. It can’t be parlayed into a residential investment property.
See Housing New Zealand Corporation rules on KiwiSaver and HomeStart grants here.
In normal circumstances, when you apply to use your KiwiSaver funds towards your first home, you’ll need to complete a first home withdrawal form. You’ll be required to produce an unconditional sales and purchase document and a solicitors undertaking as part of the process.
If you’re planning on tapping your KiwiSaver funds to offset the cost of building your first home, understand that the money can only go toward the purchase of the land itself. Further, you’ll need to provide evidence of your imminent plan to build on that land.
You’ll need to produce plans for the build, showing all related costs, evidence that it’s consented to and compliant with local authorities and has a firm start and completion date.
And if you’re planning to build a tiny home on wheels for future relocation, it’s back to the drawing board my friend.
Under the current regulations, first homes that are financed with your KiwiSaver funds must be built on a foundation.
If you are a handyman/woman and it’s your plan to DIY the tiny house, you’ll need to provide Housing NZ Corp will a Quantity Surveyor detailing the costs of the project, built to a “code compliance certificate standard.’ You’ll also have to note your own costs and associated labour costs within the price estimate.
To qualify for the HomeStart grants that can be used alongside your KiwiSaver funds, the total combined costs for the land and the land and the build, need to be with the relevant house price caps.
The house price caps on first-time homes vary depending on where you live in New Zealand. For Auckland, it’s currently $650k for new builds and $600k for existing properties. It’s $550k for most other cities and $450k in the provinces.
How much you’re eligible for from the HomeStart grants will depend on how long you’ve been in KiwiSaver. Just like KiwiSaver, you have to have been invested for a minimum of three years.
For those buying an existing property, you may be eligible to receive $1,000 for each year up to a maximum of $5,000. For new builds, it’s double. So applicants could receive between $6,000 to $10,000.
And if you’re sharing your tiny home with another KiwiSaver member who is also a first-time homeowner, you’ll both qualify for the additional funding on top of KiwiSaver funds.
Whether you’re buying or building a new home, there’s plenty to wrap your head around.
Being prepared and doing some research ahead of time will save a lot of headaches along the way, especially if you're using your KiwiSaver funds and potentially HomeStart grants.
For more detailed information, please visit Housing New Zealand Corporation’s website here.