If you’re wondering if you can buy an investment property, you’re not alone! Investment properties are one of the most popular ways Kiwis choose to build wealth, but getting finance approved can be more complex than many expect.
In this guide, we’ll break down the lender rules, deposit requirements, and the steps you can take to enhance your chances of securing an investment property in New Zealand.
We Are Now in 2025
Since the 2023 election, investor rules have once again shifted. The National-led government has:
- Phased back interest deductibility – 80% from 1 April 2025, moving to 100% by April 2025.
- Announced the bright-line test will shorten to 2 years from July 2024.
- Signalled adjustment to CCFA rules to make responsible lending more flexible.
What this means for investors: Lower tax bills over time and improved cashflow forecasting – especially if you’ve been holding off purchases due to high holding costs.
What Does This Mean For Your Tax Bill and Cashflow?
Policy changes are important, but what really matters is how they affect your bottom line. here’s what lenders consider today and how that impacts your deposit, borrowing power, and cashflow.
What Lenders Consider For an Investment Property Mortgages
The Rules
When considering a mortgage application, lenders must follow the Responsible Lending Code under the Credit Contracts and Consumer Finance Act 2003 (CCCFA). The Responsible Lending Code has undergone several changes over the years.
NZ mortgage rules used to be strict, and banks took a hard line approach. But in 2023, lending checks were relaxed and the latest updates have made the process smoother.
Lenders still need to confirm you can afford a home loan, but now they can apply common sense and consider your real situation.
The new code also makes it clear – discretionary spending like holidays or luxuries isn’t part of your core living costs. When applying for a mortgage, you don’t need to prove you can keep paying for extras, only that you can manage the essentials.
If you’re looking to better understand home loan deposit requirements and how updated rules affect your chances, you can read more about the responsible lending changes here.
The Calculations
Lenders apply several calculations to decide whether to approve an application for an investment property.
This includes:
- Calculating the loan-to-value ratio (LVR). The LVR is the amount loaned compared to the value of that property. This determines how much deposit is required. See the section below, “How much deposit do I need for an investment property?”
- Calculating the debt-to-income ratio (DTI). DTI ratios are calculated by the total debt divided by the total gross income. The DTI ratio for new investor lending is 7. However, some banks can lend up to 20% of their portfolio to borrowers with a DTI ratio over 7.
- Calculating any current credit cards and overdraft debt by their limits, not actual amounts owed. They don’t take into account how you use these limits. So, paying credit card balances off each month won’t improve this calculation. Instead, close as many lines of credit as you can.
- Calculating whether the applicant could afford to pay the mortgage if interest rates increased. This is currently calculated at around 7.00% – 7.50% interest per annum. They take into account any existing mortgages in this calculation.
- Calculating the mortgage payments using a shorter period. Some banks require an investment mortgage to be paid off over a shorter period than owner-occupied, e.g. over 25 years rather than 30 years. Applicants would need to be able to afford the resulting larger payments.
- Banks scale rental income by approximately 65% to 75% to account for periods of tenant vacancies and other costs such as rates and insurance.
If your bank has declined your investment loan application, our Bank Said No investor guide explains why this happens and what you can do next.
Illustrative Example of Cashflow Impact for Investors: 2024 to 2026
Here’s how the staged return of interest deductibility affects a $600,000 loan at 6.5% interest (annual cost $39,000):
| Tax Year | Deductibility | Deductible Interest | Cashflow Benefit vs 2023/24 |
|---|---|---|---|
| 2023/24 | 50% | $19,500 | Baseline |
| 2024/25 | 80% | $31,200 | +$11,700 |
| 2025/26 onward | 100% | $39,000 | +$19,500 |
Non Bank Lender Options – Lower Deposit Pathways
Non bank lenders are often more flexible than traditional banks when it comes to approving home loans or investment property applications. This flexibility comes from their unique lender criteria and willingness to take on higher risks – though it can come with slightly higher interest rates. If the banks say no, that is, has declined your application, non bank lenders can be a great alternative.
Want to understand the differences more clearly? Explore our guide on the benefits and risks of non bank lenders to help you make informed decisions once these differences are understood.
At Platinum Mortgages, we work with both bank and non bank providers to match you with the provider that best fits your circumstances. Some specialist lenders may assist with as little as 10% deposit (conditions apply), whether you’re purchasing a new build or an existing property.
Current Deposit Rules for Investor Properties
It all depends on the type of lender and the type of property being purchased. In addition, lenders often adjust their policies.
- Banks usually around 30% for existing properties
- Non Bank Lenders 20%-10% (additional conditions on 10%)
- New builds can sometimes be as low as 5% if you meet the First Home Buyer criteria
What to read next: Our dedicated deposit guide (coming soon) provides a full breakdown with worked examples and lender comparisons. We’ve only touched on the key rules here – for a deeper dive into deposit options and strategies, check out the guide once it’s live.
Do I Need Cash for my Deposit, or Can I Use Equity?
Either! It’s common to use a mixture of the two. Most investors buying an investment property need to use at least some of their equity (i.e. the value of their current properties) towards their deposit.
How Do I Use My Equity to Purchase an Investment Property?
Platinum Mortgages help with investment lending and will manage this process for you. Depending on your options, you may need to decide whether to reuse the lender that holds your current mortgage or a different lender.
When using equity for an investment, it’s key to understand how the LVR limits impact you and which lenders or banks are appropriate for your situation. This is where Mortgage Advisers shine!
How Can I Improve My Chances of Getting an Investment Property Mortgage?
Clean Up Your Debt
As much as you can, pay off any “bad / short term” debt. This means laybys, car loans, credit card debts and credit defaults. As mentioned above, when it comes to credit cards and overdrafts, lenders look at the limits, not what is currently owed. Ideally, cancel any lines of credit, or if that’s not possible, get the limits reduced as much as possible.
The challenge is that paying down debt tends to reduce your deposit. This can be a balancing act, and you need advice specific to your circumstances. As always, talk to us for specialized advice!
Maximise Your Income
If you have any investment properties already and are in a position to review the rents, make sure the rents align with the market.
If you’re employed and feeling brave, ask for a pay rise! A pay rise of just a couple of dollars an hour, may allow you to borrow tens of thousands more.
Maximise Your Equity
Review the value of any current properties. They may have gone up in value considerably since they were last valued. This would dramatically increase the amount of equity you could borrow against.
Look for Investment Properties That Lenders Will Approve
This means you may want positive cashflow properties, i.e. properties with rental income higher than the mortgage and expense costs.
Look for properties where you can borrow less and add value by renovating. This will grow both the capital and the rental income. Or look at buying a new build, which would give you the benefit of tax exemptions.
Remember, you’re looking for an investment property, not a home for yourself. This could mean you buy in a location nowhere near where you live, and a property you wouldn’t be interested in for yourself.
Establish Healthy Spending Habits
Review your spending habits and make a plan to reduce where necessary. Go for at least three months under your new spending regime, before applying to have proof of changed habits. While this step isn’t essential to get approved for a home loan, it does make your application more attractive to lenders and is a good way to practice living within a reduced budget while growing your savings!
We’re Here to Help You Invest – Get Expert Advice
Getting an investment property mortgage doesn’t have to be stressful. Through investment focused non bank lenders who understand the unique needs of property investors, it’s possible to secure approvals that mainstream banks often decline. The best first step is to get in touch with a mortgage adviser. We will assess your current situation and advise you of your options. Contact our investment mortgage broker us and get your property portfolio underway!
★ We Are Trusted
Angela is an accredited Financial Adviser, licensed under FSP742251 and has been in the Financial Industry since 2006. Our 5-star Google reviews reflect the excellent customer experience we promise — making your home loan journey positive, stress-free, and rewarding. At Platinum Mortgages, our clients are the reason we exist — so you can be confident every step is guided by genuine care and expertise.