Ready to jump on to the property ladder?
Investment Property Loan
Creating investment property portfolio has been an excellent way of creating wealth. Generally, chances of making capital gains are higher if you are a long-term property investor. New Zealand has been a hotspot for property investors over the past few years.
We help our clients to achieve their dreams of owning rental property and to create their property portfolio. We have created a list of few things to keep in mind when you are ready to purchase your investment property.
Do your research:
There is a lot to keep in mind. Knowing where to buy, which property to buy, the age of the property, property management, and maintenance cost, purchase price vs rental income return, mortgage availability, getting in touch with your solicitor for ownership structure, getting in touch with your accountant for taxation planning are key factors to keep under check.
How much you can borrow:
There are two things to consider when we discuss your borrowing capacity:
1. Maximum purchase price based on equity available in your existing property plus available cash deposit:
Reserve Bank of New Zealand has removed Loan-to-valuation-ratio (LVR Ratio) lending restrictions on residential lending recently. Now, most of the banks are offering up to 80% lending against an investment property you are looking to buy. This means that you will need to bring 20% deposit to buy your residential investment property. You can use equity available in your existing owner-occupied property towards the deposit. The difference in existing home loan against your existing house and maximum possible lending against your own house is your “Usable Equity” towards your next purchase. You can meet any shortfall of deposit from the savings available with you. This means that most of the banks now allow you to borrow 80% against your existing owner-occupied property and 80% against your investment property.
2. The maximum possible mortgage that can be approved by the lender based on your existing income and potential rental income:
When we have worked out your maximum possible purchase price for the next property and you decide to go within that limit, we need to check whether your loan will be approved by the lender or not.
We can shop around and find a suitable lender for you to fulfill your needs and will make sure that it is a profitable deal for you.
Interest Only loan
Paying only interest on the investment property loan is possible. Some lenders allow up to 5 years interest only term and after that, you start paying principal and interest.
Do I get discount on Interest Rates for investment property loan?
Most of the lenders give a further discount on interest rates than advertised on their website so don’t settle on the specials advertised by the banks. We can negotiate discounted interest to secure a better deal for you.
Do I get Cashback on your investment property loan?
Most of the lenders are still giving cash back to attract the customers which may cover your solicitor, property valuation, building inspection cost etc. involved in the property purchase. However, lenders will require you to return the cash back in case you repay the lending partially or fully within a certain time period, generally 2-4 years.
Ownership Structure and Tax Planning
You will have rental income from the investment property, which is a taxable income. You can offset your interest cost and some other expenses against your rental income in relation to the investment property. Having appropriate ownership structure can also help you in the tax planning. We highly recommend that you consult your solicitor and accountant when you are buying a rental property to determine the best options for you.
Documents required to apply for Investment Property Loan:
Generally, following documents are required to secure a pre-approval for an investment property loan:
– Latest 3 payslips of each applicant
– Latest 3 months salary and transactional bank account statement
– Latest 3 months existing home loan statement
– Passport of each applicant
– Property details if you have finalised any property so far
In case, any of the applicants is self-employed, the bank will require last 2 years business financial statements to determine the level of earnings for that applicant.
Get in touch with us:
Contact us on 0800 700 600 and book appointment to have a no-obligation meeting to assess your overall position and get on to the next steps.