Buying your investment property
When it comes to investment, people often look at investing in property. The common saying goes “Your tenants help you to pay the mortgage while you build your property asset”. In recent years, property prices have jumped by 30% and the obsession of New Zealanders is only going to keep growing.
Having tax experts & mortgage brokers under one roof, we can give you best possible advice on how to structure your mortgage to save on tax and interest.
Reasons why you should buy an investment property
- The equity from your existing property can be used as a deposit to buy an investment property.
- Flexible home loan options, including interest-only options for up to five years. This means that you can use the rental income to offset the interest payments on your loan.
- Capital appreciation: over time your property increases in value, and it becomes worth more than what you originally paid.
- Tax benefits for the loss accrued, as you can claim expenses such as rates, water, insurance, maintenance, interest on your loan from the rental income you receive.
How much can I borrow?
The answer depends on the equity you have built in your property, assets and liabilities, current mortgage repayments, and potential rent you will get from the investment property.
With the introduction of Loan to Value Ratio (LVR) restrictions, when buying a residential investment property, you will need at least a 40% deposit. In some cases, there are exemptions to the LVR restrictions that apply.
To calculate the LVR ratio, let’s say –
Your deposit: $100,000
Value of the property: $400,000
Your home loan: $300,000
Your LVR: 75%
Your LVR is how much a bank lends against mortgaged property, compared to the value of that property. In this example, the LVR is 75% ($300,000/$400,000=75% with 25% deposit).
Talk to our Mortgage Expert today to discuss your options.
Structuring your loan
You may be already familiar with Fixed, Floating, and combination of both interest rates. Based on your lifestyle, we can work out all options and get the best interest rate so you can become debt free faster.
Negative gearing on property investments
People buy an investment property to offset the loss against their income tax. On your investment property, you get a mortgage and pay interest for the whole year, you incur other expenses such as rates, insurance, repairs, fees, commission, etc. Once you take the expenses out of the rental income, you may find that your expenses outweigh the income. Your loss offsets your income which helps you to pay lower income tax at the end of the year and is regarded as one of the key benefits of negative gearing.