Investing in property in New Zealand can be a great way to build long-term wealth. However, coming up with the minimum deposit amount required can be a major hurdle for many potential investors. In this article, we will look at the key factors that determine the minimum deposit needed to invest in property in New Zealand.
LTV Ratio Requirements by Lenders
In New Zealand, most lenders require a 20% minimum deposit for an investment property loan. This means if you are purchasing a NZ$500,000 investment property, you will need to provide at least NZ$100,000 as a deposit. Some lenders may allow higher loan-to-value (LTV) ratios up to 90% LTV for investors with a good credit history, but the interest rates are usually higher.
Deposit Amount Needed for Avoiding LMI
Lenders mortgage insurance (LMI) is an insurance premium charged by lenders when your deposit amount is less than 20% of the purchase price. It protects the lender from potential default. By providing a 20% or higher deposit, you can avoid paying this extra insurance cost that often runs into thousands of dollars.
Factors Affecting Minimum Deposit
While 20% is the typical minimum deposit required, the actual amount needed can vary based on factors like your personal financial situation, the location and type of property, lender policies, and current real estate market conditions. Those with stronger financial profiles may qualify for lower deposits.
The minimum deposit amount needed to invest in property in New Zealand is typically 20% of the purchase price. However, you may need more or less depending on your specific circumstances and the lender. A 20% deposit allows you to get the best interest rates and avoid costly lenders mortgage insurance.