Love thy neighbour, share a house

you can apply for a first-home withdrawal, so long as you meet the qualifying criteria. Photo / Getty Images

Q: I married my neighbour 18 months ago and we are about to shift into his house, which is rented out. We would like me to buy into the house to provide funds for doing it up/landscaping. Can I use KiwiSaver funds, and get the $5000 Government grant as this is the first house I will have owned?

A: Therese Singleton, AMP's general manager of insurance and investments, says as you intend for this to be your principal place of residence you can apply for a first-home withdrawal, so long as you meet the qualifying criteria for a KiwiSaver first-home withdrawal.

"You will need to provide a sale and purchase agreement, together with your first-home withdrawal application so you will need to seek legal advice on how to best proceed," says Singleton.

This is a really important point.

Money for first-home purchases is never paid out by a KiwiSaver provider into your bank account.

Providers want to see a copy of the sale and purchase agreement and a letter from your solicitor confirming funds withdrawn will be part of the deposit or final settlement on the property.

It will also want details of your solicitor's trust account, where it will pay the money on settlement day.

If everything falls through your solicitor will need to repay the money to your KiwiSaver provider.

It's these rules that mean KiwiSaver funds can't be used after a sale has gone through to, say, knock back the mortgage a bit or if there is no legal sale and purchase agreement.

As Singleton points out, getting advice from a lawyer will help you work out whether using your KiwiSaver funds is an option.

You may also be able to apply, or seek pre-approval for the HomeStart grant of up to $5000 if you meet the other eligibility requirements.

It pays up to $5000 for individuals or $10,000 for couples buying their first home and doubles if you're buying a new-build.

Eligibility is a lot tougher than a first-home withdrawal. The HomeStart grant is aimed at helping people on modest incomes to buy modest homes, so its application form takes a good hard look at your finances.

You will need to have been a committed KiwiSaver, making regular savings at minimum levels for at least three years, and earn $85,000 or less (before tax) if you are buying the property yourself, or as a couple earn a combined income of $130,000 or less.

You are also limited to purchasing a property under the house price cap for your region. These range from $450,000 to $650,000 depending on where you live.

• The HomeStart grant is administered by Housing New Zealand.