Investment Home Loans
Buying a rental property can be a great way to secure income for your future. However, before you jump right in, come and chat to us as we have a few helpful tips for you.
You might have some equity in your current property that you can use to help you get into the investment game, perhaps you have sold your current property and are looking to downsize and put the equity into an investment property.
The mortgage itself is the document that the bank uses to take security over your property. So when applying for a ’mortgage’, as most of us say, you’re not actually applying for a mortgage, you’re applying for a home loan.
When you apply to the bank for your home loan and the bank says yes, you can have one they give you the loan but also take out a mortgage over your home. Which means in the event that you cannot make repayments on your loan the bank has the opportunity to sell the house to recoup costs.
Hence the term ‘free hold’, people often use this term when they have finished paying off their home loan. The bank no longer has a mortgage over the property, therefore they own the house free of the hold of the bank’s mortgage.
How much deposit will I need to buy an investment property?
If you’re buying a rental property, you will need (from May 1st 2021) a minimum deposit of 40% of the purchase price. The only exception to this rule is if you’re building a new property in which case, as little as 20% deposit is sufficient.
Where can I get my deposit from?
This can come in the form of a physical deposit such as cash or savings, however, most ‘mum and dad investors’ use the equity they have built up in their family home to purchase their first rental property. Your equity can be calculated using the following example.
1. How much is my owner occupied (family) property worth
a) $800,000 – the bank will allow you to borrow up to 80% of the value of your owner occupied home
2. How much is 80% of the value of my family home)
a) $800,000 x .80 = $640,000
3. How much do i currently owe the bank on my home loan
4. What is 80% of the value of my family home LESS what I currently owe?
a) $640,000 – $300,000 = $340,000 – This is the equity or ‘deposit’ that you have to put towards your rental property.
5. What is my equity divided by 0.4 (40%)?
a) $340,000 / 0.4 = $850,000 – This is the maximum you could spend on a rental property based on the equity available in your family home and the requirements to have at least a 40% deposit. If you can prove you can afford to, this is how much you could borrow.
I’m a first home buyer, can I use my Kiwisaver to buy a rental property?
Unfortunately, current rules in New Zealand state that a Kiwisaver withdrawal can only be used to buy an owner occupied home and cannot be used to purchase a rental property.
Refinancing Home Loans
Not happy with your current bank, another bank is offering a product that is more suited to your needs? Why not consider refinancing.
Next Home Home Loans
Upsizing? Do you have a growing family and need another room or a bigger backyard? Or maybe your kids have left the nest and it’s time to downsize and simplify? Let’s see what your options are.
Many Kiwis dream of owning a holiday home, their perfect hideaway from the hustle and bustle of everyday life. Come chat to the team at Mortgage Sure and we will try to help make owning that holiday home a reality.
Renovating Home Loans
Renovating (and maintaining your home) is the perfect opportunity to increase the value of your home whilst utilising the equity in your home to fund the alterations. Come talk to us about how to go about this.
Calculate Your Mortgage Repayments
Do a quick calculation to see what your repayments may be.