Investment property deposits in New Zealand and how the rules actually work

Why investors usually need more, and when you might not

Why investors are treated differently

Investment properties introduce extra layers of risk:

• Rental income can rise and fall

• Maintenance costs can be lumpy

• Investors are often more leveraged and more likely to sell if markets fall

Because of this, the Reserve Bank sets tighter LVR settings for loans secured by residential investment property than for owner occupied homes.

In simple terms, they want more equity in the deal so that both the bank and the investor have a bigger buffer if things change.

How much deposit do investors usually need?

From 1 December 2025, the Reserve Bank settings mean that:

• Investor loans are classed as “high LVR” if lending is more than 70% of the property value

• No more than 10% of new investor lending can sit above that level at each bank

So in practice:

• For an existing property, banks normally expect a 30% deposit from investors

• There is limited scope to lend above 70% LVR, although it is very rare across main banks in the current market, and more likely to be seen with non-bank lenders

For new builds, things are more flexible:

• New residential construction lending can be exempt from standard LVR restrictions, for both owner occupiers and investors

• Many banks are comfortable with 20% deposits on qualifying new build investment properties

• Some lenders may accept lower deposits again, but this is product specific and must still meet each bank’s risk policy

This is one reason new builds have become a favourite pathway for investors looking to expand with lower headline deposit requirements.

DTI rules for investors

DTI restrictions apply to investor lending as well. From 1 July 2024, banks can only allocate up to:

• 20% of new investor lending to borrowers whose total debt is more than 7 times their gross income
  

In practice, this means that even if you have a strong deposit position, a high overall debt level can still limit access to bank funding.

Because DTIs are new (as of November 2025), lenders are still bedding them in.

You will see differences between banks in:

• What extra checks they want for higher DTI applications

• How they treat different income sources and business debts

• How strictly they apply their own servicing rules on top

So two banks can give very different answers from the same starting position.

For investors, DTI interacts with:

• Existing home loans

• Existing rental debt

• Consumer and business debts

• The proposed new lending for the purchase

Rental income is included in the assessment, but lenders will usually shade it and build in assumptions for vacancies, expenses and rate changes rather than taking it at face value.

In the current high interest rate environment, the overall impact on the market has been modest, because many investors hit standard servicing tests before they hit the DTI cap. DTIs are expected to bite harder in a lower rate environment, when cheaper repayments would otherwise allow much higher debt levels.

As with LVR rules, there are also DTI exemptions, for example on new build lending, certain refinances, and some short term or specialised lending. The detail varies by lender, which is why it is important not to assume every bank will treat your application the same way.

Where do investor deposits usually come from?

Most investors do not build their deposit purely from cash savings. Common

sources include:

1. Equity in the home you live in

   1. Many first time investors start by releasing equity from their owner occupied home

   2. That equity then forms the deposit for the investment

2. Equity in other investment properties

   1. As values grow and debt is paid down, you can refinance to release equity

   2. New builds and existing stock can be used differently depending on LVR treatment and your strategy

3. Cash savings and windfalls

   1. Bonuses, business profits, or inheritances can top up equity based deposits

4. New builds and construction funding

   1. Because new builds are treated more flexibly under LVR rules, some investors use a 20% cash or equity deposit for a new build (or in some cases, even lower), which can be easier to assemble than 30% on an existing property

Non-bank lenders can sometimes push LVRs higher again, especially for short term bridging or more complex projects. This comes at a cost in terms of pricing and fees, and usually with tighter conditions.

Example: using equity to buy an investment property

Say you own your home:

• Value: $1,000,000

• Current mortgage: $500,000

• Maximum owner occupied lending at 80%: $800,000

Usable equity:

• $800,000 minus $500,000 = $300,000

You are looking at an existing investment property:

• Price: $750,000

• Standard investor LVR: 70% lending, 30% deposit

Required deposit:

• $750,000 × 30% = $225,000

One possible structure:

• Use $225,000 of the $300,000 usable equity as the deposit

• Take a $525,000 investment loan secured against the new property

• The remaining $75,000 equity capacity could be left unused for buffers or future plans

The bank will then test:

• LVR across both properties

• Your DTI, factoring in personal income, rental income, and assumed expenses

• Your ability to service the debt at stressed rates

If you instead choose a qualifying new build, the deposit might only need to be

20%, which could change your purchase price range or keep more equity in

reserve.

Common traps for investors around deposits

1. Assuming equity equals cash

   1. Usable equity is a ceiling, not an automatic loan

   2. You still need the income and DTI room to support the extra borrowing

2. Ignoring portfolio wide LVR

   1. It is easy to fixate on one new purchase

   2. The bank will look at your whole portfolio LVR and your resilience in a downturn, especially if they hold all of the properties as security

3. Underestimating costs

   1. Deposits are only part of the picture

   2. Maintenance, vacancies, insurance, and rates all affect your ability to hold through cycles

4. Over relying on exemptions

   1. LVR and sometimes DTI exemptions for new builds are helpful

   2. They are not a guarantee that any deal is automatically low risk

5. Not thinking about exit strategies

   1. Higher leverage and cross security can make it harder to sell a single property in future without wider restructuring

   2. Clear exit plans help keep risk under control

   3. We recommend split banking to provide additional liquidity within your portfolio

Pulling it together

For investors in today’s settings:

• Expect to need 30% deposit for existing residential investment properties

in most cases

• Plan on 20% deposit for many qualifying new builds, subject to each

bank’s policy

• Remember that DTI and servicing can be just as limiting as deposit size

• Think of your home and rentals as one portfolio, not separate boxes

Used well, deposits and equity can grow a portfolio steadily and sustainably. Used poorly, they can stretch you too thin for the next rate rise or market wobble.

Looking at your next investment?

If you are unsure how much deposit you need, how the new rules affect you, or

how best to structure lending across your properties, get in touch and we can

review your portfolio and borrowing power.