Investment Property loans have always been sought by both New Zealanders and Australians, who see that a way to plan for their financial future is to accumulate one or two residential rental properties, which they can add to over time, to become significant rental investment property portfolios.
Whilst Banks have in the past lent to 90%, the rules changed, firstly to 70% just in Auckland then to 60% across New Zealand. This is driven by the Reserve Bank who wish to slow down rising property values.
Legal and Tax advice are often critical initial steps, which we would recommend, but once you are comfortable with the direction you are taking, we can help you with advice on obtaining your first or next rental investment loan. Or, maybe you are looking for alternative options as your Bank is telling you that you are already over the 60% allowed level or you have too many rentals (too rent reliant) and they will not lend you anymore.
It has always puzzled me that they will lend to such a high level on one or two incomes, that can be terminated through redundancy or sickness, but they do not recognise the value of diversifying your income through rentals!
Now if you have been with a Bank as a property investor you will have discovered that they like to have your home loan on their books, before they consider a rental, especially if you have a low deposit. This gives them the option is to leverage off the equity in your own home to buy a rental with 100% finance or a no deposit rental loan. Many investors see this as too bigger risk and they like to keep their home with one Bank and rentals with another.
Some common problems we run into with Banks is that the more rentals you have, the harder it gets, especially when the 60% rule is applied. In recent times, we have helped clients release equity from their Bank rentals to allow funding through a Non Bank lender to 90%. This option has now dropped, and 80% is the new maximum. This may even have to be done with a combination of a first and second mortgage. Policy changes are occurring almost daily, with greater flexibility with first time Mum and Dad investors rather than the experienced investors with larger portfolios. A fair comment would be that Non Bank lenders, providing long term funding options, will be under increased pressure going forward to adhere to the 60% rule with limited exceptions. Short term lenders may still provide a bridging option beyond 60% which can then be refinanced to a Bank as they are allowed to refinance an existing facility at say 80% as it falls outside the rule. This is referred to as a “like for like” refinance.
With Banks now also showing some reluctance to lend to borrowers with offshore income we are pleased that we can still offer funding to both New Zealand and Australian residents buying a rental property in New Zealand living here, or "over the ditch" in Australia.
Some key criteria if you wish to borrow for a rental purchase are:
Stable employment / sustainable business income, that can be evidenced idealy via finiacial accounts.
Clean Credit and loan repayment history.
Properties must be in the more established areas, in good condition, with recent comparable sales occurring in the local area.
If living offshore, lender must understand who will manage the property and resolve any possible tenant issues.
So, if you are having trouble finding sufficient deposit with your Bank to allow you to purchase a residential rental investment or it is just too tough when you try to buy another, you may find a Non Bank option is right for you.
If you are a Kiwi or an Aussie, on either side of the Tasman, looking for a residential investment property loan to buy a New Zealand property contact us now because you can't always bank on your Bank.