Investment Property
A good investment loan can make property investment a much smoother process.
What is an Investment Property Mortgage?
Buying an investment property can be an excellent way to create wealth.There’s a lot to know about investments, such as investment strategy and how to choose the best investment loan that meets your needs and goals.
If you don’t plan to live in the home you buy, you need an investment property mortgage. The interest rates are the same as home loans for owner-occupied properties.
Explore your deposit options
You may be able to use the equity in your existing home to buy an investment property. you'll need at least a 20% deposit or equity in your existing home to be approved
What is equity?If you sold your property and repaid your home loan, your equity would be the amount you have left.
For example if you have a house worth $800,000 with a $500,000 home loan, you have $300,000 of equity in the property.
Be aware that if you use your current home’s equity, it means less cash out of your own pocket, but it does put your primary home at risk if you don’t make payments. Or worse yet, if your investment property's tenants don't pay rent, you'll have to find another source of income to keep up with the mortgage.
Loan Repayments and Investment Property Mortgage Options
As an investor, you have a few financing options:
Interest-only mortgage - An interest-only mortgage is a loan which requires the borrower to pay the interest charged on the loan, and not the amount borrowed. The Benefits is you have less cash to invest and the principal portion of investment property loan is not tax deductible.
Fixed-term mortgage –On average, it’s fixed for six months to five years. This helps keep your budget intact, especially since rental payments are fixed for the duration of a lease.
Floating mortgage –the floating mortgage increases and decreases as the lender’s mortgage rate changes. Rates offered by every New Zealand lender have been at historic lows. But If rates go up significantly, it can hit your budget hard. However, with a floating mortgage, you have more opportunities for prepayment or extra payments, which you may not have with the fixed mortgage.