1. Get your deposit together
If you want to buy an investment property you’ll usually have to stump up a bigger deposit than if you’re buying a house to live in. Generally, if you’re buying a house to live in (an owner-occupied house) you'll need a 20% deposit – with an investment property it’s 30%. There are some circumstances where you might be able to get a mortgage with a smaller deposit, but you’d need to talk to one of our home loan experts.
Using equity from your home as a deposit
If you already own your own home, you might be able to use some of the equity you’ve built up in it as a deposit on an investment property. Equity is the difference between the current value of your house and how much you owe on it. For example, if your house is worth $500,000 and you owe $200,000 on your mortgage, you have $300,000 in equity. You build up equity as you pay down your mortgage or if your house rises in value.
You can’t use all of the equity from your house – your bank will usually want you to leave at least 20% of the value of your property – but depending on your circumstances, you might be able to use some of it as a deposit on an investment property.
The bank will also take other things into consideration like your income and the potential rental income of the investment property. Talk to one of our home loan experts to talk through your options.
‘Rentvesting’ for first-timers
House prices have risen rapidly in recent years, and many would-be buyers find themselves priced out of their preferred suburbs. Rather than buy a house to live in that is a long commute from work, friends and family, some buyers look to enter the property market as rentvestors. This is where you buy a house in an area you can afford, but rent it out, rather than live in it.
If you’re a first-time buyer hoping to dip into your KiwiSaver to fund the purchase of an investment property, you’ll be disappointed - you can only withdraw KiwiSaver savings to buy a home to live in, not an investment property.