KiwiSaver hardship withdrawals and your mortgage: what you need to know

General information only. KiwiSaver rules and each provider’s forms and requirements can change, so check with your provider and Inland Revenue (ird.govt.nz). Every situation is different.

What a KiwiSaver hardship withdrawal is for

KiwiSaver is locked in for retirement, with a few exceptions. One is significant financial hardship. Inland Revenue lists the grounds, and one of them is that you cannot pay the mortgage on the home you live in and your mortgage provider is seeking to enforce the mortgage. Being behind on payments isn’t enough by itself. The lender has to be taking enforcement action.

Other grounds include not being able to meet minimum living expenses, medical treatment, serious illness, palliative care and funeral costs for a dependant. I’m focusing on the mortgage one here.

Who decides, and what they want to see

Your KiwiSaver provider decides, not me and not your lender. The scheme rules say the trustees must be reasonably satisfied that you are suffering, or are likely to suffer, significant financial hardship. They must also be satisfied that reasonable alternative sources of funding have been explored and exhausted.

That second part catches people out. A KiwiSaver hardship application needs a completed statutory declaration covering your assets and liabilities. Beyond that, each provider has its own form, and it will want evidence. Typically that means:

• the provider’s application form (you apply to your provider, not Inland Revenue, unless you’re in your first 2 months of membership)
• evidence of the problem, such as lender letters and any enforcement notice
• statements showing your income and outgoings
• a clear account of what else you’ve tried

Check your provider’s form for its exact list. The trustees can limit the payment to the amount needed to relieve the hardship. The most you can take is your account balance, excluding the Crown contribution.

Alternatives to a KiwiSaver hardship withdrawal

Because the provider expects other options to be used up, I’d start here. A hardship withdrawal also takes money out of your retirement, so it’s a last resort.

1. Talk to your lender early. Ask for their hardship team. Lenders deal with this regularly and you have more choices before arrears build up. My guide to dealing with mortgage arrears walks through the steps.
2. Ask about a hardship variation. Depending on the lender, that can mean a temporary change to your repayments or a longer term. Whether it’s offered, and for how long, is the lender’s call.
3. Restructure the debt. Rolling expensive short-term debts into the mortgage can lower your monthly outgoings, though you’ll pay more interest over time. See debt consolidation for how that works.
4. Get support. Work and Income and a free budgeting service can help with the household side.

Where a mortgage broker fits

I can’t approve a KiwiSaver hardship withdrawal, and I don’t decide what your lender will agree to. What I can do is look at your whole position, work out which of the options above are realistic, and help you set out your income, outgoings and what you’ve tried. That paperwork matters to both your lender and your provider.

If you’re in arrears but not yet facing enforcement, there may be time to refinance or restructure. Once a lender has started enforcement, options narrow, so the earlier the better. The mortgage rescue page explains what I look at. I work with homeowners across New Zealand, remotely, so you don’t need to be in Auckland. I’m not an insurance adviser and I don’t sell insurance.

If an application is declined, ask the provider why and what extra evidence would help.

If you’re worried about losing your home

1. Contact your lender now, before the next missed payment if you can.
2. Keep every letter, email and note of phone calls.
3. Write down your income and outgoings for the last 3 months.
4. List the options you’ve tried and the answers you got.
5. Ask your KiwiSaver provider for its hardship form and requirements.
6. Get independent advice, such as a budgeting service or a lawyer, if you’ve received formal notices.

Common questions

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This article is general information only and isn’t personalised financial advice. Figures are illustrative and based on the assumptions shown. Mortgage Sense is a trading name of Yatin Kainth, a Financial Adviser (FSP1007497) providing advice under the Mortgage Managers licence (North West Group Holdings Ltd, FSP682791). See the Disclosure Statement.