If you’ve bought yourself a Kiwibuild property you may find yourself in a position where you’re unable to get additional lending on the property, or
rent it out for a certain period of time (often between 2-3 years depending on the development & agreements signed).
While things certainly seem rather restrictive, in reality you’ve just bought yourself ample time to get to a stronger financial position. The embargo
period goes by quickly when you are focusing your energy on saving up for a bigger deposit, strategising and paying down your debts.
Once you are free to invest, you have two options (in general) to weigh up:
1. Keep living in the Kiwibuild and buy an IP: You could look at topping up the mortgage on your home with the help of a registered valuation to fund
a deposit towards your IP. This is particularly the case for many properties in the current market where prices are appreciating quickly. Many
homeowners are finding their homes worth more than what they had paid for. This coupled with any savings and debt reductions over time could put
you in a strong equity position to continue borrowing. In terms of serviceability, some lending criteria has gotten slightly easier (depending
on financial position) for certain clients, so your serviceability may also be in a stronger position too. It’s worth getting this part checked
out by your mortgage adviser if you’re planning on purchasing IPs in the future.
2. Keep the Kiwibuild as an IP and buy yourself a new home to move into: By the end of the embargo period, your Kiwibuild building is likely to still
be in very good nick saving you maintenance and repair cost in the long term. Lower operating costs can certainly alleviate the financial and emotional
stress on first-time investors. Also, since May this year many banks (not all) are now willing to top up an investment mortgage to 80% instead
of the 70% previously giving you a bigger buying power to get into your next home.
Both options have their own merits and drawbacks. I strongly recommend that you take some mortgage advice to determine which is best for you. In the
meantime, keep on working and saving hard. Any extra dollar you can put away now will end up being a great help when it comes to borrowing for
a second property later!
I’ve been really enjoying interacting and helping APIA investors achieve their goals. If you would like more information or arrange a consultation
please do not hesitate to email me at [email protected].
ABOUT THE AUTHOR
Ryan is a Key Accounts Manager at Kris Pedersen Mortgages and Insurance as well as a property