Buying guide

Everything you need to know about investment home loans

Home loans for investment property work a little different to your average mortgage

Last updated: 22 February 2024

Whether you succeed or fail as a property investor will depend on a few key factors - including your investment property home loan. 

Your repayments will probably be the biggest expense you have as an investor, so it’s vital that you choose a mortgage that's tailored to help you reach your goals, with a competitive interest rate. That’s easier said than done, so we’ve put together a guide to help you get started. 

Getting a deposit together

There is a high barrier to entry for new property investors. Unlike buying a home to live in where a 20% or 10% deposit will do, you’ll need at least 35% in most cases. Here are a few tips for getting your investment home loan deposit together.

Leveraging your existing property

If you’ve owned your home for a while and it’s increased in value, chances are you’ll be able to borrow against it to cover a deposit for an investment property. Generally your bank will allow you to borrow up to 80% of your property’s value - this borrowing can make up all, or part of, your deposit. 

Using a non-bank lender

If you can’t get together a 35% deposit and you don’t have enough equity in your home, using a non-bank lender is worth considering. These lenders are not governed by the same strict rules as the banks so they may be more willing to lend to you with as little as a 20% deposit on a new or existing build. These lenders may charge slightly higher interest rates than the major banks for this service. 

Buying a new build

Existing builds require a 35% deposit from investors but to buy a new build you’ll generally only need 20%. They also often have lower ongoing costs due to low maintenance and repair bills, and can be great investments. 

Sorting your investment home loan is the first step toward buying an investment property.

Type of property to consider


Residential property is the best option for most new investors. It provides regular income with a lower risk of vacancy than other options and less work required from you (especially if you have a property manager). You’ll need a 20% deposit for a new build residential property and 35% for an existing build. 

Short term accommodation

Short term residential accommodation can be lucrative if your property is in a good location, well presented and effectively marketed. But it also has a higher risk of vacancies, particularly if your property is in a seasonal holiday location. You’ll need a 35% deposit to buy a property to use as short term accommodation, regardless of whether it’s a new build or existing property. You’ll also need to spend a lot of time managing the property, or pay someone a hefty percentage of your property's income to do it for you. 


Commercial property comes with higher risk, more complexity and high rental yields than most residential properties. If a tenant leaves it’s not uncommon for a property to remain vacant for months or even years so commercial property is best suited to investors with plenty of capital and experience. 

Figuring out your strategy

Before you buy an investment property and secure an investment home loan, it’s important to figure out what your investment strategy is going to be. You can then match your mortgage to your strategy. 

Buy and hold

Buy and hold is the most popular, lowest risk strategy for property investors. It involves purchasing a property, renting it out, then paying off its mortgage over 10+ years. Properties ideal for this strategy usually have high rental returns, where the income from the property covers most or all of the expenses.

At the time of writing (22/02/2024) a property like this may be very difficult to find due to high interest rates.

Read our 2024 mortgage interest rate forecast.

Before buying an investment property you should always speak to experts.

Buy and flip

Buying and flipping is a riskier, higher skill investment strategy. It usually involved purchasing property below market value and either holding it then reselling it soon after when the market rises, or selling it after adding value or renovating. If this is your chosen strategy an interest free mortgage could be a good option, to keep costs low before you sell - as well as a revolving credit if you need extra funds for renovations.

Interest-only mortgages

Interest-only mortgages are popular with investors, but they should be used with caution. These mortgages only have interest repayments, meaning you won’t reduce the principal of the original loan at all. 

This may be ideal if you’re planning on buying and selling quickly, or if you need extra cash flow for other investments - but it is risky. If property values go down you may be faced with negative equity (where your loan’s worth more than your property), which can make it hard to refinance. 

Doing your sums

Before you buy a rental property it’s important to work out as many of the variables as possible (this is where a good spreadsheet can come in handy). To get started work out:

  • How much monthly rental income will the property earn? It’s a good idea to estimate this on the low side and account for vacancies of around three weeks. 

  • What will the expenses be? This number should include maintenance, property management fees, mortgage payments, repairs, insurance and more. It’s important to note that interest rates for property investment are generally a bit higher than for owner occupied properties. 

  • Will the property appreciate in value? The median value of a home in New Zealand has more than doubled over the last decade, but past performance is no guarantee of future performance. This is a tricky variable to calculate, but you can make some informed estimates based on the level of housing stock vs demand in the area you’re buying, population growth and any infrastructure projects planned in the area. 

Finally, you should work out if the rental income is enough to cover your expenses. If not, can you afford to cover expenses out of your pocket to hold the property, and is it worth holding if it’s costing you money? Having a well thought out, long term strategy can make answering these questions easier. 

Read more about buying an investment property in NZ.

Buying an investment property is easier with a good lender behind you.

Applying for an investment loan

It’s a good idea to start talking to a lender or mortgage broker with investment property experience as soon as you decide to buy an investment property. Don’t default to your bank right away either - consider all your options, including mortgage brokers, banks and non-bank lenders.

  • Mortgage brokers can provide access to a number of lenders, helping you choose the best one for your situation. They can also provide free  impartial advice and may have access to better rates than the banks advertise through their industry connections. 

  • Bank: going with a bank can be convenient. You may already have your transaction and savings accounts with them and they can also usually offer insurance and investment accounts. Plus if the bank knows you and has your details, the application process may be smoother. However, they can only discuss their products and services - meaning it’s important to consider all your options before you commit to borrowing money from a bank. Banks may also have stricter criteria than other lenders and may be more likely to say no. 

  • Non-bank lenders: these lenders are similar to banks in most ways but they may be more open to lending to low deposit, or risky borrowers. They will usually charge higher interest rates.

When choosing a lender, explore several options to find the best deal - and it’s always worth negotiating for a better rate or to waive certain fees. You may be surprised what you’ll get by simply asking. 

Investment home loan pre-approval

Before you start searching for properties it’s a great idea to get pre-approval from your bank or lender. To get this you’ll simply need to:

  • Fill out an application form, either online or provided by the lender. 

  • Provide proof of income, expenses, employment and your identity. 

    • This may include three months of bank statements, pay slips or employment contracts, verified identification documents etc. 

The lender will then assess your financial situation and accept or decline your application and indicate how much they will lend you. This will help give you certainty around your budget so that you can view investment properties and know that you can afford them. 

Before you make an offer or attend an auction it’s a good idea to get formal approval. Your bank will assess the property you intend to buy then provide an offer with mortgage documents to sign. 

Before you start searching for properties it’s a great idea to get pre-approval from your bank or lender.

Getting expert advice on your investment home loan

Buying, financing and managing an investment property is hard work but you don’t need to do it all yourself. There’s advice available to help you weigh your options, navigate loan applications and make difficult decisions. You could speak to:

  • A mortgage broker: if you need advice about financing an investment property purchase, and even choosing an investment property, a good mortgage broker with experience in property investment can help. Mortgage brokers are required by law to be registered financial advisors so they may be able to help with the other stuff, from budgeting to insurance. Mortgage brokers usually offer a free service. 

  • A financial advisor: financial advisors are equipped to help with all  financial matters, from assessing your level of insurance, to budgeting and personal finance. Make sure you choose on with property experience if you’re looking for investment advice. You may need to pay for the services of a financial advisor. 

  • An investment property advisor: investment property advisors are financial advisors who provide specific investment property advice. They may be able to help with budgeting, saving a deposit, applying for a loan, choosing an investment property and choosing a professional to manage the property. Sometimes these advisors are paid via commission by the home builders whose properties they recommend. This may incentivise them to recommend investments they otherwise might not, so make sure you ask about how they’re paid before committing. 

  • Your bank: your bank may be a safe, easy option when it comes to advice. But keep in mind, they can usually only provide advice on their products and services. 

Getting the right advice can make or break your investment experience, so take your time when searching for someone to talk to. Look for online reviews, or ask your friends and family if they can recommend someone they trust. Just like when choosing a lender, feel free to shop around, talk to a few advisors and pick the one who ticks all the boxes. 

DISCLAIMER: The information contained in this article is general in nature. While facts have been checked, the article does not constitute a financial advice service. The article is only intended to provide education about the New Zealand investment home loan sector. Nothing in this article constitutes a recommendation that any type of loan is suitable for any specific person. We cannot assess anything about your personal circumstances, your finances, or your goals and objectives, all of which are unique to you. Before making decisions about an investment home loan, we highly recommend you seek professional advice.


Ben Tutty
Ben Tutty

Ben Tutty is a regular contributor for Trade Me and he's also contributed to Stuff and the Informed Investor. He's got 10+ years experience as both a journalist and website copywriter, specialising in real estate, finance and tourism. Ben lives in Wānaka with his partner and his best mate (Finnegan the whippet).