Current lending restrictions don’t need to hold you back if you are looking to expand your property portfolio.
The appetite for investment is still strong in the Wellington region, with 31% of all house purchases going to investors between January and March 2017. While the Reserve Bank lending restrictions for investors can make it harder to buy a rental, there are still opportunities to secure an investment property without needing a 40% deposit.
Use your equity - for people who already own a home, you can borrow up to 80% of the value of your family/occupied home to fund the deposit.
Build a new home - a new house can be built as rental with as little as 20% deposit (sometimes less), as new builds are exempt from lending restrictions. Once the home is built you can only use up to 60% of its value to fund any other property purchases.
Consider non-bank lenders - traditional banks aren’t the only lenders to consider, with non-bank lenders filling a gap in the market. Some fund up to 80% on a standalone rental home mortgage, and to finance multiple property purchases.
If you are a straightforward borrower, you can expect to pay similar or slightly higher interest rates than the major banks offer on their carded rates. Some of these lenders do require that the family home is refinanced to them as part of the deal so that is something buyers need to be aware of. They also tend to ask for a registered valuation on a property, regardless of the size of the deposit, which can cost between $600-$700.
Factor in growth - when considering a rental property look at its capital growth and cashflow potential, as both of these can offset higher funding costs, and provide more equity further down the track when you go to buy another property.
There’s a range of options to consider, beyond needing a 40% deposit, when looking at an investment property. Talk with a trusted mortgage advisor to make the most of your leverage and build up your portfolio.
Contact us now to discuss your options.