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Borrowing for Investment Property
The Benefits of Investing
Over the long (and sometimes short) term, rental property can be a great way to build wealth.
Rental property (and housing in general) has been the favourite type of investment for Kiwis for a long time. The benefits of owning it include the potential capital gain, the rental you receive from it and the ablity to leverage against it to borrow.
Lending Rule Changes
There have been major changes in the way that lending rules have been applied to investment property, especially over the past few years. Our central bank – The Reserve Bank – has many roles when it comes to deciding how and when different monetary polices will be applied. One of the biggest policy changes to affect investment property owners and buyers over recent years has been the introduction of loan to value (LVR) restrictions which mean that you can borrow less against an investment property than you can against a home you are going to live in. The changes, rolled out firstly in Auckland and then extended to the whole country, mean that you can only borrow up to 60% against rental property.
For people wanting to borrow more against rental property there is some good news. A long as you have an owner-occupied property and are buying rental property we can arrange to have this bundled together and go to 80% across a combination of the two.
The reason this can be achieved is that the borrowing rules set by the Reserve Bank only apply to registered banks. “Non-Banks”, no matter how big are not governed by these rules. We have access to funding through these entities and can help answer any questions you have about borrowing through them Contact us
When it comes to rental property there are many different options, and rules that affect them.
Commercial property is one option but a majority of investors choose residential.
Residential can be broken down into two main categories – Stand Alone property (houses on land) or multi-unit dwellings such as apartments. Each have their own challenges and rewards and each type is looked at in different ways by different banks at different times. Sounds confusing? It is. Every bank has lending criteria that changes all of the time. The differences are greatest when it comes to different types of property. Contact us and we’ll be happy to talk to you about the best options.