Property and finance blog

If you have an existing mortgage and are considering joining up with Kiwi Saver, or perhaps you are an employee or alternatively self-employed, I recommend that you talk to a mortgage broker first.

 

Here is why

 

A 4% KiwiSaver contribution may not sound like much, but it will have an impact on your budget and also possibly have an effect when you refinance your mortgage.

 

Lets us look at some numbers to begin to illustrate the point.

 

The 4% figure is based on your gross salary. For people earning $50,000 p.a. that is $2,000 p.a. or $167 a month. An 8% contribution will mean $4,000 p.a. or $334 a month.

 

If your finances are all ready tight that could be a significant increase in your outgoings.

 

Now when it comes to refinancing your mortgage the news for those on a tight budget could be concerning.

 

Say for example you have an $180,000 mortgage (for a 20 year term) fixed at 7.5% three years ago – your current monthly payments are $1450. Based on current market rate of 9.25% your new payments will be $1649, that’s an increase of $200 a month.

 

An increase in your outgoings for KiwiSaver will clearly have an impact on your ability to make repayments.

 

How are the lenders treating KiwiSaver contributions?

 

At this stage, advice from lenders is divided on how they will treat KiwiSaver contributions; some lenders (who look at gross income) say they will likely treat KiwiSaver contributions as an expense, while other lenders will look at net income after the KiwiSaver contribution.

 

There are some options but as I mentioned earlier, I recommend talking to your mortgage broker before you join KiwiSaver and well before you have to refinance any existing arrangements.