Understanding Minimum Deposit Requirements for Investment Properties

equiti Ltd Posted on 19 March 2025

If you’re considering purchasing an investment property, one of the first questions you’ll likely have is, “How much deposit do I need?” The answer depends on several factors, including your financial situation, the property type, and current lending regulations. In this blog post, we’ll break down the basics of deposit requirements for investment properties to help you better understand what’s involved.

Current Deposit Requirements

The Reserve Bank has set Loan-to-Value Ratio (LVR) restrictions, which influence how much deposit you need for an investment property. Currently, most investors are required to have a minimum deposit of 30% of the property’s value when purchasing an investment property. This means that, for a property valued at $800,000, you’ll need a deposit of $240,000.

These restrictions are in place to ensure financial stability in the housing market and to minimize risks for both lenders and borrowers. However, it’s important to note that these regulations can change over time. Keeping up to date with the Reserve Bank’s announcements or consulting with a mortgage advisor can help you stay informed.

Why Are the Deposit Requirements Higher for Investment Properties?

In most instances, the deposit requirements for investment properties are higher compared to owner-occupied homes because of the increased risk involved. Lenders consider investment properties to be riskier since they rely on rental income to cover mortgage repayments. If the property remains vacant for any reason, investors may struggle to meet their financial obligations. To mitigate this risk, lenders require a higher deposit for investment properties.

Are There Any Exceptions to the 30% Rule?

There are certain situations where you may be able to secure an investment property with less than a 30% deposit. These exceptions include:

New Builds: If you’re purchasing a newly built property, some lenders may allow a lower deposit of 20%. This is because new builds are seen as a way to increase housing supply, and lenders are often more supportive of these purchases.

Equity from Another Property: If you already own a property, you may be able to leverage the equity in it to fund the deposit for your investment property. This can reduce the amount of cash you need upfront.

Non-Bank Lenders: Some non-bank lenders may offer more flexible deposit requirements, though they often charge higher interest rates. It’s essential to carefully weigh the pros and cons before choosing this option.

Purchasing an investment property in New Zealand requires careful planning, and understanding the deposit requirements is a crucial first step. While the standard minimum deposit for an investment property is 30%, there are exceptions and strategies that can help reduce this burden. Consulting with a mortgage broker or financial advisor can provide you with tailored advice to suit your situation.

Investing in property can be a rewarding journey, but it’s important to approach it with the right knowledge and preparation. By understanding the deposit requirements and planning ahead, you’ll be better equipped to achieve your property investment goals.