Investing in rental property may seem like an attractive option currently due to low interest rates and recent increases in house prices. For most people to take the next step and become investment property owners they will need to use finance in the form of a mortgage.
How can you pull together a deposit for an investment property loan?
If you already own your own property then you can use the equity that you have already accumulated to go towards another property.
If you are unsure how much equity you have in your current home then you can go to Homes or OneRoof and get an estimated value. Once you have that figure subtract the amount you have left owing on the mortgage and the remaining amount is how much equity you have.
Typically the bank will require you to leave 20% equity in your current home and be able to contribute enough equity to cover 20% of the value of your rental property. If you can reach the 20% mark then this will unlock the best interest rates and save you money on every mortgage repayment.
Otherwise if you are short of the 20% goal you can top up your deposit amount through savings to reach the threshold.
Until recently the Reserve Bank implemented a 30% loan to value ratio (LVR) rule requiring all investors to hold 30% equity. While this rule is not currently in affect the government may choose to intervene again in future.
Should you talk to a mortgage broker or bank?
If you already have a good relationship with your bank then you can talk directly to them, however it may pay to talk to a mortgage adviser as well who can ensure that you get the best rates.
Mortgage brokers can be helpful especially if you are right on the threshold of having enough for a 20% deposit. If not they will also be able to advise you on non-bank lenders such as credit & building societies. These lenders have difference criteria to banks and may be able to finance you into a new home sooner.
What’s more is that because mortgage brokers are able to compare banks they may even be able to help you get a better rate on your existing mortgage by switching to another bank.
Given that mortgage brokers operate completely free of charge we think that it is well worth talking to them before you start looking at open homes so that you can get your mortgage pre-approval underway and have a realistic idea of how much you can afford to borrow.
We recommend talking to local Christchurch Mortgage Broker Adam from Lending Choice who offers great experience on everything to do with NZ home loans having worked for both Westpac and ANZ.
Is now a good time to buy a rental property as an investment?
The Christchurch housing market is currently running red hot thanks to returning kiwis coming back to New Zealand and younger buyers putting their OE savings towards home deposits thanks to restrictions on overseas travel.
Prices have been steadily growing over the past few years however property prices still remain far more affordable that other main New Zealand Cities like Auckland and Wellington. Major projects like the Metro Sports Centre, Convention Center and new Stadium are still to be completed. This presents an opportunity for investors to get in before the rebuild is finished. Once land becomes more scarce then property values should catch up to the rest of New Zealand.
Where to look for investment properties?
There are many places to look for investment property from the likes of TradeMe and homes.co.nz to the sales brochure from your local real estate companies if you wish to purchase an existing home.
If you want to purchase a new home Wolfbrook also offers new build townhouses in Christchurch, Wellington & Auckland. These new townhouses are perfectly suited for investors with modern features and easy care sections. We offer a 2 year rental guarantee for any property built and managed by us giving new and old investors piece of mind.
To see some of our recently completed projects head to the website.
Choosing a Christchurch property management agency
Once you have successfully purchased your new investment property the next thing on the list is to work out how you are going find tenants and manage it on an ongoing basis. This is where getting professional property managers to look after your asset and get the maximum yield from your investment can be a good move.
Wolfbrook Property Management are experienced Christchurch property managers and would love to help you start your property investing journey.
We can help with the following:
For more information contact our team of Christchurch property managers today!