Buyer guide

Buyers track the deposit. Banks run three tests, and the smallest answer wins.

1. Deposit / LVR. 80% of value for owner-occupiers, 65% for investors buying existing stock, 70% on new builds. Banks can lend past this for a small share of their book — that is what a low-deposit approval is.
2. DTI. Total debt capped at 6x gross income for owner-occupiers, 7x for investors. New builds are exempt. This is what usually stops a second purchase.
3. Servicing. Repayments tested at roughly 2 points above the rate you are offered, with rent counted at about 75% and every card limit treated as drawn.

The Strategy Lab runs all three and names the one that binds.

Budget about $4,000–$6,000 on top of the deposit, before you move anything:

• Solicitor: $1,500–$2,500
• Builder's report: $600–$1,200
• LIM: $300–$500
• Registered valuation, if the bank wants one: $900–$1,200
• Moving, connections, insurance from settlement day

Then a maintenance buffer. A house costs roughly 1% of its value a year to keep standing, and it arrives in lumps — a roof, a hot water cylinder, a retaining wall.

• First Home Grant: gone. Scrapped on 22 May 2024. Only pre-existing approvals were honoured. Any calculator still adding $5,000 or $10,000 is out of date.
• Kāinga Ora First Home Loan: still running. 5% deposit, underwritten by Kāinga Ora through participating lenders, subject to income and price caps. This is the main way past the LVR wall.
• KiwiSaver first-home withdrawal. Three years of membership, and you must leave $1,000 in. Start the paperwork three months out — it takes 10–15 working days and settlement will not wait.

These are the same purchase, held differently. The Strategy Lab runs all four through identical costs and tax so the comparison means something.

• Live in it, boarders, clear the mortgage. Rent the spare rooms, put the surplus into extra repayments. Lowest risk, no tenants' rights complications, and the income is tax-free up to the IRD threshold. One asset, so growth compounds once.
• Live in it, boarders, recycle the equity. Same house, but the surplus stays liquid and you top up the mortgage to fund a deposit on a rental. Fastest growth in net worth, and the most exposed — a rate rise hits every property at once.
• Rent it out on P&I. Debt falls every month. Weakest cashflow of the four, because you are repaying principal out of rent.
• Rent it out on interest-only. Best cashflow while it lasts. You own no more of the house in five years than you do today, and the payment steps up when the interest-only term ends.

"Use the equity to buy the next one" is four concrete steps, and each one has a way of failing:

1. The house grows. Value rises, or you pay the loan down, or both. Equity is the gap.
2. The bank revalues it. It will release up to 80% of value, minus what you still owe. On a $600k house with a $360k loan that is $120k, not the $240k of equity you technically hold.
3. You top up the loan. The release is new borrowing secured against the first house. Your debt goes up today; the repayments come out of the same pay packet.
4. The top-up becomes the deposit. 35% of the next purchase, plus costs. The remaining 65% is a new mortgage on the new property.

Net effect: you now owe roughly the full price of the second house across two properties. That is leverage working — in both directions.

Interest-only drops the payment to just the interest. On a $400k loan at 5.5% that is about $1,833 a month instead of $2,271 — roughly $440 a month of breathing room.

What it buys and what it costs:

• Cashflow now, which can turn a property that bleeds into one that holds itself.
• No equity from repayment. In five years you owe exactly what you owe today, so every dollar of equity has to come from the market.
• A payment step-up at the end. The same debt now has 25 years to clear instead of 30, so the P&I payment is higher than it would have been.
• More interest over the life of the loan, because the balance sat still while it accrued.

Banks usually grant one to five years, and typically only where the loan is comfortably under 80% LVR. It is a cashflow tool, not a plan.

• Boarders in your own home. Under the IRD standard-cost method, up to $245 a week per boarder, 4 boarders maximum, is effectively tax-free. This is what makes the live-in strategy work.
• Rental income is taxed at your marginal rate, on rent minus interest, rates, insurance, upkeep and management.
• Interest is 100% deductible again on residential rentals from 1 April 2025.
• Rental losses are ring-fenced. A loss carries forward against future rental income. It will not reduce the tax on your salary.
• Bright-line test: 2 years. Sell inside that and the gain is taxed. Your main home is generally exempt.
• Principal is not an expense. Only the interest part of the payment is deductible.

Nearly always one of three things, in this order of frequency:

• DTI. On $120k of income the investor cap is about $840k of total debt. A $500k first home leaves $340k — not enough for a second purchase in most of the country.
• Servicing. The stressed rate is roughly 2 points above what you actually pay, and only 75% of rent counts. Boarder income usually counts for nothing here, even though it is real money.
• Equity. The one people plan for, and the one that binds least often.

The Portfolio Plan tab shows which of the three blocks you, year by year, instead of assuming the money appears.

Most NZ stock sells without a published price. What the method changes:

• Auction. Unconditional on the fall of the hammer. Finance, builder's report and LIM all have to be done beforehand, at your cost, with no guarantee you win. Set a ceiling from comparable sales and write it down before you go.
• Deadline sale. Offers by a date, often multi-offer. You can still attach conditions, but a clean offer beats a higher conditional one more often than people expect.
• By negotiation / POA. The most room to move, and the least information.
• Asking price. A starting point, not a valuation.

Where a listing publishes no price, HouseScout shows its own estimate and labels it. Treat the modelled value as your ceiling, not as a guide to the vendor's reserve.

1. Budgeting the mortgage, not the house. Rates, insurance and maintenance run $8,000–$10,000 a year on a modest home before a single repair.
2. Assuming 52 weeks of rent. Three weeks vacant a year is a normal assumption, and one bad tenancy costs more than that.
3. Treating a ring-fenced loss as a tax refund. It is not one, and it never was for residential rentals.
4. Planning around today's rate. Model it 3 points higher. If the plan only works at 5%, it is not a plan.
5. Counting boarder income as borrowing power. It pays the mortgage. It will not get you the mortgage.