Buying an Investment Property?
Match with a Mortgage Broker to help you find the best loan structure, rates and products for your unique situation and investment goals
- Custom advice for your personal financial position
- Generate an extra source of income
- Potential tax advantages
- Steady capital growth
- A stable investment
Lenders We Work With
Our Mortgage Advisers work with New Zealand’s leading Investment Property providers…
Compare the rates across New Zealand’s major lenders
Why choose Mortgage Matcher?
Second-tier lender options
What do you need to know before Investing in a Property?
1. Deposit Requirements
Generally, most large banks will require a 35% deposit for an investment property purchase. If you are purchasing a new build, then a lower deposit of 20% may be all that is required.
If you are needing to borrow a higher amount, a second-tier lender may be able to lend more. These lenders charge higher interest rates however, which you’d need to factor into your decision.
If you own your own home, you may be able to use the available equity as your deposit. For example, you can generally borrow up to 80% of the value of the home you live in, so if you’ve already paid off 40%, you have 40% equity you could use to go towards the deposit on an investment property. If you’re in a position to do so, you can also use a combination of cash and equity.
Find out how much you can borrow – Loan Pre-Approval
The first step to buying an investment property is to find out how much you could potentially borrow, so you can narrow your search to find properties that fit within your budget.
Lenders will consider a number of factors when determining how much you can borrow, including:
- the potential rental income
- your income
- debts you hold
- number of dependents etc.
By engaging with one of our experienced and knowledgeable Mortgage Advisers, we can assist you through the process of obtaining a loan pre-approval. We will ask questions to understand your current financial position and then request some supporting documentation.
We understand exactly what the banks are looking for, so we can efficiently put together a strong loan application to be submitted to multiple different lenders, ensuring you have the highest chance of obtaining a pre-approval and receiving the best terms to suit your personal situation / financial goals.
2. Rental Income and Capital Gain
Rental income (the rent your tenants pay to live in your property) and capital gain (the value of your property increasing over time), are the two types of potential returns you could enjoy from an investment property.
Your chosen strategy will determine the criteria a property needs to meet, to achieve your ideal return.
Some common strategies include:
- buy and sell once your target is achieved
- look for a property with optimal yield – maximum rent for minimum investment
- buy and flip
To help you compare properties with different values and rental returns, you can calculate the gross yield (the rent you could receive over a year, calculated as a percentage of the property purchase price).
- For example, if a property is valued at $500,000 and expected rent is $400 per week, take the annual rental income of $20,800 ($400 x 52 weeks) and divide that by the property’s value $500,000 and multiply by 100 = Yield of 4.16%
It’s important to remember that the gross yield calculation doesn’t account for repairs and maintenance costs; interest rates; periods of vacancy; insurance and rates etc. To take these into consideration, you can calculate the Net rental yield as follows:
3. Finding a suitable property
Aside from purchasing a residential property, you could consider investing in commercial property or a holiday rental. Regardless of the type of property, consider the following when choosing your investment property:
- Location – Is the property close to schools, public transport, shops and cafes? Is it likely to be well-tenanted or to experience a growth in property prices?
- Condition – Does the property need a lot of work or has it been well maintained? Does it comply with the Government’s Healthy Homes Standards?
- Demographics – Does the property suit the type of tenants in the area E.g. Low maintenance for busy young professionals? Flat, easy care section for elderly tenants?
4. Tax Implications / Risks to consider
In the first instance, it’s important to seek advice from an Accountant / Lawyer regarding the possible tax implications of purchasing an investment property. Some things to look into:
- Which bright-line period applies to you (2, 5 or 10 years) The bright-line property rule is for when you sell a residential property you have owned for less than 10 years. The new government has recently announced there will be changes to the rules, commencing from the 1st of July 2024, so it’s important to understand how these may affect you and your future decisions.
- If you were to sell your property, would you be subject to any other tax legislation, under the Income Tax Act for example
- Do you qualify for any exemptions to the interest limitation rules?
- Is your property classed as a ‘new-build’ and what are the different rules around tax for this type of property?
- Will you be exempt from GST if you plan on renting your property long-term or are you intending on renting out short-term, which is considered a taxable activity for GST purposes?
- What is the best borrowing entity for your situation, in order to ensure tax efficiencies? Personal names; Trust; Company?
Potential risks and other things to consider, when purchasing an investment property:
- If your owner occupied home is mortgaged with the same bank as your investment property and you find yourself unable to pay either mortgage, the bank could sell both properties
- Interest rates, insurance and council rates could increase, so any money you make from rental income, would be reduced
- An investment property requires more time and effort than investing in shares / managed funds or simply saving money in the bank. You need to find and manage your tenants, organise for repairs and maintenance to be carried out and ensure your investment is performing how it should be. You can hire property managers to ease the workload, but this will also cut into your returns.
Getting the right advice from professionals is crucial to making an informed decision and setting yourself up for success.
Benefits of using a Mortgage Adviser
Mortgage Advisers simplify the process of applying for a loan and provide valuable advice around how to structure your finance. There are many different options to structuring your lending that we advise on, including Interest Only to help with cash flow; splitting your rental property lending with a separate bank; suggesting the best products and rates for your circumstances and shopping around for a lender with the most compatible lending policy, for your unique situation.
- We work closely with Accountants, Real Estate Agents and Lawyers to help provide you with the best all-round service.
- We help guide you through the entire process of obtaining a loan pre-approval, to making an offer and the tasks you need to complete before and on settlement day.
- We also assist you with your home loan interest rate refixes and review your home loan regularly, to ensure you’re getting the best possible loan terms, as your personal situation changes over time.
We work for you, not the bank and you don’t pay a cent for our services!
With Mortgage Matcher...
Get matched with a Mortgage Adviser who can
Simplify and streamline the lending application process
Answer your questions
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Help you achieve your property investment goals
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Property Investment Frequently Asked Questions
An investment property is Real Estate purchased with the goal of generating rental income or realising capital appreciation. It can be residential or commercial property.
Residential investment loans are for purchasing a home, whereas commercial investment loans are used to buy business property. Each has unique lending criteria, deposit requirements and interest rates, so we assist you in choosing the right option for your investment.
Commercial investment loans often require a much larger deposit (generally 35% – 40%), whereas residential loans usually only require a 10%-20% deposit. The interest rate on a Commercial loan is usually higher, with the loan also required to be repaid over a shorter period of 10-15 years, unlike a residential loan which can be on a 25-30 year term.
Property investment offers potential rental income, tax advantages, and the opportunity for property value appreciation over time, making it a popular long-term investment strategy.
Yes, there are potential tax advantages, including deductions for mortgage interest, property taxes, and certain expenses. We recommend consulting with a tax professional to fully understand and leverage these benefits.
Our experienced Mortgage Advisers specialise in securing finance for investment properties. We navigate the lending market to find competitive rates and terms, tailored to your individual investment goals.
There are various loan options, including fixed-rate and floating loans, as well as interest-only loans. Some lenders offer revolving credit facilities, which act like large overdrafts, helping borrowers reduce their interest costs and pay their mortgages off faster, but with the ability to redraw the funds if required. Another option is an Offset home loan, which also reduces interest paid, as you don’t pay interest on the total balance of any funds sitting in your selected savings and everyday accounts.
We help you understand the pros and cons of each and choose the best fit for your investment strategy.
Begin by contacting us through our website or giving us a call. Our team will guide you through the mortgage application process, helping you secure the finance you need for your investment property.
Financing an investment property involves considerations such as interest rates, loan terms, deposit requirements and potential rental income. Mortgage Matcher helps you navigate these factors so you can make informed decisions.
Capital gains tax from a residential rental property may be applicable if you sell the property within a 10-year period, commonly referred to as the ‘bright line test.’ Depending on when you acquired the property, will determine whether you’re subject to the 2, 5 or 10 year period bright-line rules. With the recent change in Government comes a change to these rules, expected from the 1st of July, 2024. We recommend seeking advice from your Accountant for detailed information on what, if any, bright-line rules you’d be subject to.
Property investors face the dilemma of prioritising higher short-term rent or greater long-term equity. For wealth-building, experts recommend focusing on properties with significant potential for capital gain. Conversely, to generate retirement income, a common strategy involves investing in more affordable properties with a higher rental yield.
The common expenses often involved with purchasing and owning an investment property include the valuation costs sometimes required for a mortgage, building inspections, loan repayments, insurance, council rates, body corporate fees, repairs and maintenance, property management fees, accountant fees, rental property advertising costs and fees for drawing up a tenancy agreement. You also need to factor in that your property may have periods of time where it is vacant and therefore you’re not receiving any rental income.
Investors should be considering things such as the location of the property:
- Are there good existing local amenities?
- Is it close to schools, public transport, shops, parks and cafes?
- Does it have good off-street parking/garaging?
- Does the property suit the likely type of tenants in the area?
- Has the property been well maintained or is it needing a lot of work?
- Does it comply with the Government’s Healthy Homes Standards?
You don’t need to already own your own home to purchase a rental property, however, lenders will loan you a smaller percentage of a property’s value when purchasing an investment property, compared to a home to live in, so you’d need to be able to front up with a larger deposit. If you already own your own home, you can often use the equity to help purchase an investment property and therefore you won’t need as much, if any, savings to put towards the purchase.
Wondering what are latest rates are?
See below to compare the current rates offered by New Zealand’s biggest lenders
Compare Rates
| Lender | Floating | 6M | 1Y | 18M | 2Y | 3Y | 4Y | 5Y |
|---|---|---|---|---|---|---|---|---|
|
7.39 | 6.84 | 6.39 | 6.19 | 6.19 | 6.19 | 6.19 | 6.19 |
|
7.39 | 6.19 | 5.79 | 5.59 | 5.49 | 5.59 | 5.79 | 5.79 |
|
7.54 | 5.99 | 5.79 | 5.59 | 5.59 | 5.69 | 5.79 | 5.89 |
|
7.25 | 7.05 | 6.69 | 6.49 | 6.49 | 6.59 | 6.69 | |
|
7.49 | 6.19 | 5.79 | 5.69 | 5.49 | 5.59 | 5.59 | 5.59 |
See a rate you like? Talk to an Adviser about making your Investment Property purchase happen today!
The live mortgage rates supplied by interest.co.nz are designed to be updated on an hourly basis, however sometimes updates may not occur as intended. Therefore the displayed rates are for reference only and we recommend you always check with a mortgage adviser or lender directly to confirm the latest rates on offer. The rates highlighted above are the ‘leading’ bank rate of the day, these rates may not be available to everyone. The highlighted rates may be ‘specials’, have ‘LVR requirements’ are for ‘owner occupiers’, or other ‘fine print’ to meet the eligibility criteria. Please check with your adviser directly to get information specific to your own circumstances.
About Mortgage Matcher
At Mortgage Matcher, we help Kiwis get the right deal for their situation. We’ll find our customers the lowest rates, cashback options, and overall home loan package that fits their goals today – and tomorrow.
Whether you’re buying your first home or you’re simply looking for the best rates, we understand that finding the right mortgage package can be overwhelming and confusing.
Our experienced senior advisers will help you throughout the process, and ensure you get the right deal.
Why work with us?
- $200M+ in Mortgages Secured for our clients
- 30+ Bank and Lender Relationships
- 920+ Clients advised
