Where Am I Going To Find My Mortgage Deposit?

Date Published: 3 January 2024

One of the simplest ways to grow your deposit is KiwiSaver. Below, we take a quick look at how quickly your deposit could grow and the numbers around this.

Let’s say you are earning $50,000 per year on wages / salary. You contribute 3% of your income*, which is $1,500 per year. Your employer also contributes 3% and the government contributes $521 per year.

After 3 years and assuming no growth or loss in KiwiSaver, you will have contributed a total of $4,500 and your KiwiSaver balance will be $10,563 thanks to your employers contributions and government contributions. You could also qualify for the HomeStart grant of $3,000 – $6,000 which is available after 3 threes of contributions. There is $13,563 available for the purchase of a first home assuming no growth in your KiwiSaver at all! After 5 years you will have contributed $7,500, your employer will have contributed $7,500 and the government will have contributed $2,605, bringing your deposit to $17,605. But you could also qualify for a $5,000-$10,000 HomeStart Grant.

Now imagine you have a partner doing the same thing. Between the two of you, there will now be a deposit of $35,210 plus a possible First Home Grant of $20,000 if you are buying a new build under $875,000K in the Tauranga region. (see the House Price Caps here)

In just five years you could have reached the minimum deposit level of a new build in Tauranga with no extra savings made. If you’ve been careful and saved extra, you could be there much sooner.

What if my partner isn’t working?

Now let’s say you or your partner aren’t working. Should a non-working person contribute? Let’s see how that works. The government will still offer the First Home Grant, but only if you contribute the same amount as someone on the minimum wage working a 40 hour week. As of 1 April 2023 this increased to $22.70 per hour or $47,216 per year. This equates to minimum KiwiSaver contributions of ~$1,416 per year (ended 30 June) or an average of $27.24 per week. Watch those minimum wage increases or consider contributing a bit more so you aren’t caught out.

After 5 years you will have contributed $7,080. The government will have contributed $2605 in member tax credits and you could qualify for the full 5 year First Home Grant of $5,000-$10,000. This could be contributing almost $20,000 to your deposit if you follow this strategy with just an investment of $7,080. It is totally worth trying to contribute to KiwiSaver even when not working.

What if I’m self-employed?

Self-employed? Make sure you contribute either 3% of your income, or 3% of the minimum wage to KiwiSaver, whichever is the greater. This will ensure you get your First Home Grant allowance after 3 years of contibutions.

If you’re not in KiwiSaver yet and still thinking about future plans for KiwiSaver please seriously consider starting. It is one of the fastest ways to grow your deposit.

Be aware there are purchase price maximums on the First Home grant. Further information is available here: https://www.hnzc.co.nz/ways-we-can-help-you-to-own-a-home/

*Employer contributions may be subject to tax.

Mortgage Lab’s mission is to be the digital town square for financial decision-makers to gain knowledge about their current and future mortgage. Follow us on Facebook and LinkedIn or subscribe to our newsletter to be notified of our latest articles.