Disclaimer:
This article provides general information only and does not constitute financial, legal, tax, or investment advice. Property investment involves risk. Always do your own research and seek personalised advice from qualified professionals before making investment decisions.
Key Takeaways
- Most investment properties require a 30% deposit under current LVR rules.
- New builds may qualify for lower deposit requirements.
- You also need funds for purchase costs beyond the deposit.
- Equity in an existing property can count towards your deposit.
- Some lenders offer exceptions for strong borrowers.
One of the first questions aspiring property investors ask is how much they need to save before they can buy. The answer depends on several factors, including current LVR restrictions, the type of property you are buying, and how strong your financial position is.
Understanding LVR Restrictions
Loan-to-Value Ratio (LVR) restrictions are rules set by the Reserve Bank of New Zealand that limit how much banks can lend relative to a property's value. These rules are stricter for investment properties than for owner-occupied homes.
Current LVR Requirements (as at 2025):
Note: The RBNZ eased investor LVR restrictions in November 2024, reducing the deposit requirement from 35% to 30%. Banks have limited capacity to lend above these thresholds, so exceptions are rare for investors.
- Investment properties: Maximum 70% LVR (meaning you need at least 30% deposit)
- New build investment properties: May qualify for up to 80% LVR (20% deposit)
- Owner-occupied homes: Up to 80% LVR for most borrowers
What This Means in Dollar Terms
To understand how much you need, let us look at some examples based on different property prices:
Deposit Examples (30% requirement):
- $500,000 property: $150,000 deposit needed
- $600,000 property: $180,000 deposit needed
- $700,000 property: $210,000 deposit needed
- $800,000 property: $240,000 deposit needed
- $1,000,000 property: $300,000 deposit needed
These numbers can seem daunting, but remember that your deposit does not all need to come from cash savings. Equity in an existing property can contribute to your deposit.
Additional Costs to Budget For
Your deposit is not the only upfront cost. You also need to budget for:
- Legal fees: $1,500 to $3,000 for conveyancing
- Building inspection: $400 to $800
- LIM report: $200 to $400
- Valuation (if required): $500 to $1,000
- Mortgage fees: Varies by lender
- Moving and setup costs: If you need to prepare the property for tenants
As a rough guide, budget an additional $5,000 to $10,000 on top of your deposit for these costs.
Using Equity as Your Deposit
If you already own a property with equity, you may not need to save a cash deposit at all. The equity in your current home can act as security for your investment property purchase.
Example: Using Home Equity
Your home value: $900,000 Your mortgage: $400,000 Your equity: $500,000 Usable equity (at 80% LVR on home): $720,000 - $400,000 = $320,000 This $320,000 could fund a significant investment property purchase.
New Build Exemptions
New build properties currently receive preferential LVR treatment. This means you may be able to purchase a new build investment property with only a 20% deposit instead of 30%.
To qualify as a new build for LVR purposes, the property generally needs to be a new dwelling that has received its code compliance certificate within the last 12 months. Check the specific requirements with your lender, as definitions can vary.
Strategies to Build Your Deposit Faster
1. Pay Down Your Home Loan
If you own a home, every dollar you pay off your mortgage builds equity that can be used for investment property deposits.
2. Increase Your Income
Side hustles, overtime, or career advancement can accelerate your savings rate significantly.
3. Reduce Expenses Temporarily
A focused period of reduced spending can fast-track your deposit savings, even if it is not sustainable long term.
4. Consider Lower-Priced Markets
Regional areas often have lower property prices, meaning smaller deposits required. A $400,000 property needs only $120,000 at 30% LVR.
5. Partner with Someone
Pooling resources with a partner, family member, or friend can get you into the market sooner.
When Banks May Offer Exceptions
Banks have limited capacity to lend above standard LVR limits. They may consider exceptions for borrowers who have:
- Very strong income and serviceability
- Significant other assets
- An excellent credit history
- A long-standing banking relationship
However, these exceptions are rare and not something to count on. Plan based on standard requirements.
Next Steps
Understanding deposit requirements is just the first step. Here is what to do next:
- Calculate your current equity or savings position
- Determine your target property price range based on your deposit
- Get pre-approval from a lender to confirm your borrowing capacity
- Start researching areas that fit your budget and investment criteria
With clear targets and a plan, you can work systematically toward your first investment property purchase.