What to Do if Your KiwiSaver Drops Before Buying Your First Home
Buying your first home is both exciting and stressful. You’ve done your research, visited countless open homes, and maybe even gotten your pre-approval sorted. But just when you're ready to move forward, the market takes a dip—and your KiwiSaver balance goes down with it.
If you're relying on your KiwiSaver to make up a large part of your deposit, a market drop can feel like a gut punch. Suddenly, the numbers no longer add up, and the home you were about to buy might now be out of reach. But don’t panic—there are ways to work around it, and lessons you can apply for next time.
Why KiwiSaver Drops at the Worst Times
KiwiSaver funds—especially those invested in growth or balanced portfolios—are affected by market movements. This is great when markets are rising, as your savings grow faster. But the flipside is, they can also fall in value, sometimes significantly, and sometimes just when you need the money.
If your KiwiSaver balance suddenly drops $10,000 right before you apply for your withdrawal, you might find yourself with less deposit than expected. That can throw your loan-to-value ratio (LVR) off balance, or reduce your eligibility for lending altogether.
Here’s what you can do next.
Step 1: Recalculate and Reassess
First, find out exactly how much you’re short. Has your KiwiSaver balance dropped below the 10% minimum deposit? Or are you just a few thousand short of hitting the 20% needed to avoid low equity lending?
It’s important to talk to your mortgage adviser and recalculate your affordability and borrowing power based on the new numbers. Sometimes the gap isn’t as big as it feels—and a creative solution may be closer than you think.
Step 2: Check Eligibility for First Home Loan Support
If you’re now below a 20% deposit, you might still be eligible for a First Home Loan, which is backed by Kāinga Ora. These loans allow borrowers to buy with as little as 5% deposit, but you need to meet the eligibility criteria, including income caps and property price limits.
If you were planning to use KiwiSaver, double-check that your new balance still meets the criteria. A mortgage adviser can walk you through these checks quickly.
Step 3: Explore Additional Deposit Options
If your KiwiSaver balance is lower than expected, you may need to supplement it with other funds. Consider:
Using personal savings: If you’ve been saving into a separate account alongside KiwiSaver, now is the time to reassess how much you’re willing to contribute.
Family assistance: A gift or loan from a family member can help bridge the gap. Just remember, lenders will want documentation—such as a gifting declaration or loan agreement.
Reducing your purchase price: If you were looking at homes right at the edge of your budget, it may be worth adjusting your expectations slightly to stay within reach.
Step 4: Talk to Your KiwiSaver Provider
When you request a withdrawal, your KiwiSaver provider will issue a balance letter confirming how much you’re eligible to take out. If your balance has dropped, this letter may not reflect the full amount you hoped for.
Check with your provider when they lock in the amount. Some use the balance at the time of application, while others use the balance at the time of settlement. If there's time and the market begins to recover, your balance might lift again slightly—though there are no guarantees.
Step 5: Delay and Regroup (If Needed)
Sometimes the best move is to wait. If the shortfall is too large to cover, it may be wise to hold off for a few months. Market dips are often temporary, and if your KiwiSaver is in a growth or balanced fund, it could recover in time.
Delaying your purchase isn’t ideal, especially in a rising property market, but it might save you from financial overreach. In the meantime, keep saving aggressively to build your deposit and reduce reliance on volatile assets.
Strategy for the Future: Shift to a Conservative KiwiSaver Fund Early
The best defence against a pre-purchase market dip is to move your KiwiSaver into a conservative fund when you’re within 6 to 12 months of buying.
Conservative funds are less volatile, meaning they won’t grow as quickly—but they’re far less likely to suddenly lose value when markets drop. If you know you're getting close to buying, it’s a smart way to lock in the gains you’ve made.
It’s a bit like shifting your money from shares into a savings account before you spend it. Once you're in the buying phase, capital preservation becomes more important than chasing growth.
Talk to your KiwiSaver provider or financial adviser about the right time to make the switch. Some even have tools that automatically move your funds into a conservative option when you signal your intent to buy a home.
It’s Not Game Over
A dip in your KiwiSaver balance right before you buy your first home can be stressful—but it doesn’t have to mean game over. By understanding your options, adjusting your strategy, and talking to the right people, you can still get across the line.
And next time, protect your savings by moving to a conservative fund well in advance. It’s a simple step that could save you thousands—and your dream of homeownership.
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