How to use your home's equity to buy an investment property
From Aaron’s YouTube: “Using Equity to buy another house #newzealand #firsthome #kiwisaver ##nzfirsthome #nzmortgage”
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Posted 8 May 2025
The short version
- You can access up to 80% of your home's value as lending for an investment property.
- Usable equity is calculated as (80% of current value) minus (existing mortgage).
- Your income must cover all mortgage payments (existing home, equity release, and new property).
- New build investment properties require only 10-15% deposit compared to 30% for existing homes.
How equity works for investment purchases
If your home is worth $1 million with a $500,000 mortgage, you can typically access up to 80% of the home's value ($800,000) in lending. That means $300,000 in 'usable equity' (the difference between $800,000 and your existing $500,000 mortgage).
This $300,000 equity becomes your deposit for an investment property. For a $1 million investment property, it would cover the required 30% deposit, leaving a $700,000 mortgage on the new place. Your current mortgage stays in place, plus you take on the new one.
The income requirement many forget
Banks won't just look at your equity - they need proof your income can cover all mortgages. That means servicing your existing home loan, the equity release amount, and the new investment property's mortgage.
This is where many buyers get caught out. You might have the equity, but if your household income can't comfortably cover all three loan repayments, the bank will decline the application.
New builds have different rules
There's an important exception for new build investment properties. While existing homes require 30% deposits, new builds only need 10-15%.
If you're buying a $1 million new build investment, you might only need $100,000-$150,000 from your equity as deposit, potentially letting you spread your equity further or require less income to service the loans.
This is general information, not personalised financial advice. For advice on your situation, talk to Aaron.
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