For many years buying a rental investment property, or a number of them, has been a way for many New Zealander's to start planning for future retirement and creating wealth. Most start with a residential property investment, as there always seems to be a need for rental accommodation in areas where there are jobs, schools and services such as retail, medical & transport. Another reason residential investment is popular is that finance up to 80% can be available with a Non Bank lender or 60% with a Bank, on a standalone basis. 100% can also be requested if using equity in your existing home.
In the past investment loans have been approved up to 90% but with current Reserve Bank restrictions the Banks are limiting loans on rental investment properties to 60% of the purchase price or valuation and when using your home as part equity this can have borrowing at no more than 80%.
An interesting option may be to build your investment property which may still allow lending to 90%, with a Bank!
Commercial investment can be more complex and may appeal to a more seasoned investor and can often require a larger capital investment. Cash deposits are often closer to 35% or again you can also use equity in your existing home or commercial property. For more details, refer Commercial Property Finance.
The decision on buying an investment property and proceeding to arrange finance should only be made after seeking advice from your Accountant and Solicitor with regards to taxation and ownership structures.
Investment property finance is usually obtained through a Bank but they will generally now require a 40% deposit, we have access to most Banks and can point you in the right direction once we understand your personal financial position and future goals. If you wish to borrow at a level higher than 60% we will be approaching a Non Bank lender or you should consider a new build.
Interest only is a common choice with regards to repayments and whilst this reduces your monthly outgoings, and may be easier to service on your rental income, you are not reducing debt. The other option is principal and interest, where you are paying interest and starting to pay back, or reduce your loan. The best option for you will be influenced by your attitude to debt or may well be recommended by your Accountant.
With the fixed rates at present, locking in for a 2 -3 year term can remove the risk of any immediate interest rate increases and protect your cash flow. With this comes the chance of a jump in rates on expiry of the fixed rate term. You need to have a plan for this and this may be to split your finance over several terms between 1 and 5 years.
We are also now getting regular enquiries from either Kiwis, working in Australia or Australians living here or at home looking to buy New Zealand investment rental properties. Their current New Zealand Banks are limiting this to 60% plus scaling back offshore income.
Through a Non Bank lender we have access to 80% finance on existing properties, without the need of having to move your current home loan to them. This finance is on an interest only or principal and interest basis. This is a market leading product at a time when Banks are restricted beyond 60% on an existing rental property and 80% for first home buyers. Whilst genuine savings is a requirement, with clean credit and evidence of income, it is available to both New Zealanders and Australians living in New Zealand or Australia!
If you are from New Zealand and Australia, living in countries other than New Zealand or Australia, the facility may be at a lower level.
Terms and conditions will apply and property location and income details will be a key factor.
If you are looking for help with investment property finance higher than 60% and would like to talk to an adviser contact us now on:
or Freephone 0800 699436 (0800 OXYGEN)