Dan Crawford
Buying your next home often involves more moving parts than your first purchase. With a Loan Market adviser on your side, you can:
Generally, lenders in New Zealand look for a 20% deposit for an owner-occupied property. However, you don’t always need this in cash, as most homeowners use the built-up equity in their current home to fund the deposit for their next purchase.
If you are looking to turn your current home into a rental and buy a new one to live in, you will typically need to maintain 30% equity in the rental property and 20% in your new home.
Your Loan Market adviser can calculate your usable equity and show you how to structure your loans without needing to dip into your cash savings.
Equity is the difference between your home’s current market value and the balance of your mortgage. For a property you live in, banks in New Zealand generally allow you to borrow up to 80% of the value.
For example, if your home is worth $1,000,000 and your mortgage is $400,000, your total equity is $600,000. Because the bank requires you to keep a 20% buffer ($200,000), you would have $400,000 in usable equity to put toward your next home.
Your Loan Market adviser can help you get an up-to-date valuation to ensure you’re making the most of your property’s growth.
A bridging loan is a short-term finance solution that covers the gap when you find your dream home before you have sold your current one. In New Zealand, lenders typically take security over both properties, creating what is known as “peak debt” until your first house sells. Once the sale is complete, the proceeds pay down the loan, leaving you with your “end debt” on the new property.
While bridging loans often use variable interest rates, some lenders allow you to capitalise the interest, meaning the interest is added to the loan balance so you don’t have to make extra payments during the bridging period.
A simultaneous settlement is when the sale of your old home and the purchase of your new home happen on the exact same day. This is a common way to move because it avoids the need for bridging finance.
Your Loan Market adviser can work closely with your solicitor and the bank to coordinate the flow of funds, ensuring the money from your sale is instantly used to pay for your new property. While it requires precision timing, your adviser handles the backend logistics to make the key swap as smooth as possible.
Many Kiwis choose to keep their first home as an investment when they move. To do this, you typically need to have 30% equity in the current property to satisfy the Reserve Bank’s LVR (Loan-to-Value Ratio) rules for rentals.
Your Loan Market adviser will look at your total financial position to see if your income can support two mortgages. They will also help you understand how to structure your loans to make the most of your rental income and ensure you meet the specific lender requirements for investment debt.
If you want to keep your existing interest rates (especially if you are locked into a low fixed term), you may be able to use loan portability. Often called a Security Swap or Substitution of Security in New Zealand, this process allows you to move your current mortgage from your old house to your new one. This can save you from paying “break fees” on fixed-rate loans and simplifies the paperwork.
Your Loan Market adviser can check if your current loan is eligible for a swap and manage the coordination between your bank and solicitor.
If you are moving homes and want a new loan but are currently locked into a fixed-term rate, the bank may charge a fixed-rate break fee. This fee is calculated based on current market interest rates compared to the rate you are locked into.
Your Loan Market adviser can request a break quote from your bank and help you weigh up whether it is cheaper to pay the fee or use a Security Swap to take your current rate with you to the new house.
Having a pre-approval is just as important for your second or third home as it was for your first. It provides a bank-confirmed limit of what you can spend and clarifies whether you are eligible for bridging finance or if you must sell your current home first.
Your Loan Market adviser handles the heavy lifting of the application, ensuring the lender understands your plan to sell, buy, or retain your current property as an investment.
Let us know what your goals are and we will connect you with a Loan Market adviser directly.
Find out how much you may be able to borrow to purchase property.
Understand how much money you have coming in compared to what you spend using this calculator to help you identify where you could save.
Understand the amount you will need to pay your lender before you apply for a home loan and ensure you can comfortably meet your repayments.
