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Guide to Buying a Second Home

9 Jul 2024

Guide to Buying a Second Home

Owning a second home can be a fantastic way to diversify your investment portfolio, create a holiday retreat, or even plan for your future. But before diving into the exciting world of second property ownership, it's crucial to understand the process and ask yourself some key questions. Here at Lowe & Co, with our extensive experience in property management, we're here to guide you through the essential steps of buying a second home in New Zealand.

When is a Good Time to Buy a Second Home?

There's no one-size-fits-all answer to when is a good time to buy a second home. However, some factors can indicate a favourable market for second-home purchases. A healthy economy with stable or rising property values can be a good sign. Additionally, consider interest rates – lower rates can make financing a second home more affordable.

It's also important to be realistic about your personal finances. Ensure you have a financial safety net in place and carefully assess your ongoing costs, including maintenance, potential vacancy periods if renting the property, and rates.

Why Buy a Second Home?

The reasons for buying a second home are as varied as the properties themselves. Here are some common motivations:

Investment: Renting out your second home can be a steady source of income. Look for locations with high rental yields and strong tenant demand.

Holiday Retreat: Create a home away from home for getaways and family vacations. This can save on accommodation costs in the long run.

Future Planning: A second home can serve as a retirement property or a weekend escape as you get older.

How Much Deposit Do You Need for a Second Home?

Generally, lenders in New Zealand require a higher down payment for second homes compared to primary residences. The specific requirement will depend on the lender, your financial situation, and the loan type.

Can I use my KiwiSaver to Buy a Second House?

While a zero-down payment on a second property might seem appealing, it's not typically possible in New Zealand. KiwiSaver funds also cannot be used for the purchase of an existing investment property.

However, there are ways to maximise your down payment:

Equity: Consider using equity from your existing property through a remortgage. This involves borrowing against the increased value of your primary residence.

Savings: Plan and save diligently to accumulate a substantial down payment.

Can You Use Equity from One House to Buy Another?

As mentioned earlier, remortgaging your existing property is a strategy to access the equity built up in your home to finance a down payment for your second home. It’s important to carefully consider the increased monthly repayments associated with a remortgage. Consulting a financial advisor is recommended to ensure it aligns with your financial goals.

Using Equity to Build New Home

Equity can also be used to build a new home as your second property. This can be particularly advantageous if construction costs are lower than existing property prices.   Remember to factor in building and land development costs when determining the feasibility of this option.

Buying a second home in New Zealand can be a rewarding experience. By carefully considering your financial situation, goals, and market conditions, you can make an informed decision. Remember, Lowe & Co is here to assist you throughout the process.

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