A lot of the first-home buyers we helped a few years ago are now coming back to chat about what’s next—specifically, how to use the equity in their current home to buy an investment property. And the good news? It’s simpler than you might think once you understand how equity works.
So, how does it work?
Let’s say your home is worth $800,000 and you currently owe $400,000 on your mortgage. In New Zealand, you can borrow up to 80% of your home’s value when it’s your own residence. That means your total allowable lending is $640,000.
To work out your usable equity, take that $640,000 and subtract your current loan of $400,000. That leaves you with $240,000—equity you could potentially use as a deposit on another property.
Now here’s where it gets interesting: If that $240,000 is treated as a 30% deposit (which is the current requirement for investment property lending in NZ), you could potentially purchase a property worth $800,000.
What’s important to remember
That usable equity doesn’t act like cash sitting in your account—you’ll still need to borrow the full amount of the new loan. But it does open the door to growing your property portfolio without needing to save a whole new deposit from scratch.
With property values starting to rise again, now is a great time to check where you stand and whether an investment purchase could be on the cards this year.
Ready to explore your options?
Chat with one of our expert advisers—Amber, Adam, or Greg—and let’s make your next property move a smart one.