Leveraging $200,000 in home equity to invest in a second property in New Zealand offers potential benefits like diversification and rental income. However, increased financial risk, legal complexities, and clear communication with your partner are crucial, along with staying updated on property laws.
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“I’m looking for at least somewhere to start a little back story, me and my partner of 10 years, and I am splitting up but taking things slow and amicably. Now, the main question is that we have owned a home together for five and a half years, and it has equity around the 200k mark. We had the idea to use the equity to buy a second house, possibly before we split officially or after, if possible and go our own ways with one house each. Is this possible? What are the pros and cons, and is there anything info that I might not have knowledge of that’s important? And advice on this, no matter how little, is greatly appreciated.”
(Original question on Reddit)
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Using the equity in your current home, valued at around $200,000, to buy a second house in New Zealand is indeed a viable option. This strategy entails taking out a loan against the equity you’ve built in your primary residence to invest in another property. The advantages of this approach include the potential for a substantial investment opportunity, the ability to generate rental income from the second property, and the diversification of your investment portfolio. Owning two properties can spread risk and potentially increase your overall wealth.
However, there are important considerations. First, there’s an increased financial risk associated with taking on more debt. If the second property doesn’t perform as expected, or you struggle with mortgage payments on either property, it could have repercussions on both homes. Furthermore, the legal and tax implications of buying a second property can be complex. It’s essential to consult with legal and tax advisors who are knowledgeable about New Zealand’s property laws to understand the potential consequences and ensure you comply with all regulations.
Maintaining open and transparent communication with your partner is crucial, as you’re both splitting amicably. It’s advisable to create a legal agreement that outlines the terms and responsibilities of both parties, providing clarity and protection in case of future disputes. Lastly, it’s essential to stay updated with any changes in property laws and regulations in New Zealand that may impact your situation. The property market can be volatile, so staying informed is essential for making informed decisions about your property investments.
Hope this helps.
Regards, Clive Fernandes (Financial Adviser)
Director – National Capital
Disclosure: I am the director of National Capital, a KiwiSaver advice firm. The views expressed in this article are the views of the author. The information provided is of a general nature and is not intended to be personalised financial advice. You may seek appropriate financial advice from a Financial Adviser to suit your individual circumstances or contact National Capital.
