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Financing Your Holiday Home: What You Need to Know

Owing a holiday home is a Kiwi Dream. These are the steps and considerations to keep in mind as you work to turn the dream into reality.

Owning a holiday home is a dream for many kiwis, providing a relaxing retreat for getaways with friends and family. Arranging finance for a holiday home is indeed easier than you might think. However, there are unique considerations to keep in mind. In this blog post, we'll explore how to secure financing for your holiday home.

Income Considerations:

Unlike traditional investment properties, holiday homes have a distinct lending approach. Most importantly, banks will not factor in any rental income when assessing your ability to service the mortgage. Instead, your own income must be sufficient to support the lending. This means that your income and financial stability play a significant role in your eligibility for financing.

Deposit Requirements:

One advantage of financing a holiday home is that the deposit requirements are more favorable compared to typical investment properties. Banks generally require a 20% deposit for holiday homes, making it more accessible for potential buyers. This means you don't have to come up with a substantial 35% deposit, as is often the case with investment properties.

Airbnb Considerations:

If you plan to use your holiday home for Airbnb purposes, it's essential to understand the banking rules. Banks generally do not view holiday homes used exclusively for Airbnb as aligning with the spirit of lending. While this might seem restrictive, it's crucial to recognize that lenders have specific criteria for different property types. If you're purchasing a property solely for Airbnb income, it may not meet the criteria for a holiday home.

Arranging finance for your holiday home is a straightforward process, provided you meet the income requirements and understand the distinct criteria for holiday homes. The key takeaway is that banks do not consider rental income for holiday homes, so your personal income must be sufficient to cover the mortgage. With a reasonable 20% deposit requirement and a clear understanding of the lending rules, you can make your dream of owning a holiday home a reality.

If you have specific questions or need guidance on securing financing for your holiday home, it's advisable to consult with a mortgage adviser such as our friendly team here at NZ Mortgages.