Building a property portfolio is a proven way to create long-term wealth in New Zealand, offering the potential for both capital growth and passive income. However, securing lending for an investment property is different from buying your own home. Understanding deposit requirements, lending criteria, and the value of professional advice is essential for a successful investment journey.
Whether you’re just starting out or looking to expand your investments, understanding the fundamentals and seeking expert guidance can make all the difference.
Here’s a comprehensive guide to help you begin your property investment journey.
Clarify Your Goals:
Decide what you want to achieve – are you seeking regular rental income, long-term capital growth, or a combination of both? Clear goals will shape your investment strategy and help you choose the right properties.
Assess Your Finances:
Review your current financial situation, including savings, income, existing debts, available equity, and your ability to manage cash flow. This will determine how much you can borrow and what type of properties are within reach. It’s wise to get mortgage pre-approval before you start property hunting, so you know your budget and can act quickly when opportunities arise.
Once you’ve clarified your goals and assessed your finances, the next step is to understand how much deposit you’ll need and how banks assess the risk of your loan. The amount you need to contribute upfront depends on the type of property and your existing assets. In a nutshell…
Most lenders require a minimum deposit of 30% of the property’s value for existing homes. For example, to purchase a $700,000 investment property, you’ll typically need at least $210,000 as a deposit.
However, this deposit doesn’t have to be cash sitting in your bank account – it can also be made up of equity you’ve built up in your own home or another property. By leveraging your existing equity, you may be able to secure an investment property without needing to save the full deposit in cash. Lenders will assess your available equity and overall financial position.
It may also be worth considering an investment in a new build as the required deposit on these properties can be as low as 20%. This makes new builds an attractive entry point for investors with less upfront capital.
Securing a loan for an investment property involves more than just having a deposit. Lenders will look closely at your financial situation, the property you’re buying, and the wider economic environment. Here are some crucial factors to keep in mind.
Banks and lenders tend to assess investment property loans more strictly than owner-occupied loans due to the higher risk of rental income fluctuations. Your income, existing debts, credit history, equity in other assets, and the property’s rental potential all factor into the approval process.
The Reserve Bank of New Zealand sets LVR rules to manage financial stability. For investors, loans above 70% of the property’s value are considered high-LVR, and banks are limited in how many of these loans they can issue.
Depending on your investment goals, you’ll need to choose between principal-and-interest or interest-only repayments, as each option has distinct cash flow and tax implications. If you have existing home loan debt that isn’t tax deductible, you might opt for an interest-only structure on your investment property, since the interest on this loan will be tax deductible. This approach allows you to prioritise repaying your owner-occupied debt first, maximising your tax efficiency and potentially reducing your overall interest costs.
From 1 April 2025, investors were once again able to claim 100% of interest costs on investment property loans, improving the cash flow and tax position for many property owners.
Some property types (like apartments or vacant land) may require even larger deposits, and lenders may have additional criteria for properties in certain locations.
Getting started with property investment lending means being organised, proactive and surrounding yourself with trusted advisers. By taking a few preparatory steps, you can make the application process smoother and increase your chances of approval.
Review your income, expenses, and available equity. Chat with one of our mortgage advisers who will be able to help you understand your borrowing power, along with helping to organise pre-approval from appropriate lenders.
Identify locations and property types that align with your investment goals and budget.
Gather proof of income, existing loan details, and information about the property you wish to purchase.
Decide if you’ll use cash savings, equity from another property, or a combination.
Navigating the lending landscape can be complex, especially for first-time investors or those looking to grow a portfolio. Chatting with our team of mortgage, insurance and KiwiSaver advisers will provide you with clarity, access to better deals, and ongoing support throughout your investment journey. Our team will provide you with:
We stay up to date with changing deposit requirements, LVR rules, and lender policies, ensuring you’re matched with the right loan for your situation.
We have strong relationships with a range of lenders and can survey the market for the best lending package for you.
We can help you decide on the best loan structure – such as splitting your loan across fixed and floating rates, or using interest-only periods to manage cash flow.
We are also expert negotiators. Our advisers often secure sharper rates than what are publicly advertised, along with cash backs or cash retention payments for our clients. We will also help you with paperwork and guide you through the approval process, saving you time and stress.
Securing lending for property investment requires careful planning and an understanding of the current lending environment. With higher deposit requirements, evolving lending criteria, and the return of full interest deductibility, it’s more important than ever to do your homework and seek expert advice.
If you are interested in understanding more about how to build a property portfolio, book a free chat with one of our expert advisers today. And… if you book a free mortgage, insurance or KiwiSaver review this month, you’ll go in the draw to win a month’s mortgage repayments on us (up to the value of $5,000). To book your review, click here.
The content of this article should not be taken as financial advice or a recommendation of any financial product. These insights are based on current economic commentary, market pricing for interest rates, and our personal opinion. Threefold is not liable or responsible for any information, omissions, or errors present.