Can Overseas Buyers Get Interest-Only or Investment Lending in New Zealand?

But for overseas investors, the rules are tougher. Lenders face higher risk exposure, and Reserve Bank restrictions make long-term interest-only mortgages far less accessible. Here’s what you need to know before applying from abroad.

Why Interest-Only Loans Appeal to Investors

Property investors often use interest-only periods to:

• Keep repayments lower and improve cash flow in the early years.

• Redirect capital into other properties or investments.

• Manage short-term portfolio transitions before selling or refinancing.
  However, these structures also carry risk — you’re not reducing principal, interest costs are higher over time, and your equity position depends entirely on market growth.

What Interest-Only Means in the NZ Context

An interest-only mortgage means your repayments cover interest only, not the principal. Once the interest-only period ends, your loan reverts to standard principal-and-interest repayments — usually higher.

• Typical terms range from 2–10 years, depending on the property and lender.

• Owner-occupied homes generally get shorter terms (1–2 years).

• Investment loans may qualify for up to 10 years under specific policies.

• Long-term or indefinite interest-only lending is rare due to prudential regulation.

How NZ Banks Handle Interest-Only for Local Investors

As a baseline:

• ANZ and other major banks allow up to 10 years of interest-only on investment property loans.

• Owner-occupier loans often have a shorter maximum (typically 2 years).

• The Reserve Bank of New Zealand (RBNZ) discourages excessive interest-only exposure because of the systemic risk it creates if values fall.

• Some specialist lenders (e.g., Platinum Mortgages) occasionally offer extended interest-only terms, but these are niche products with higher rates and tighter conditions.

How Overseas Investor Status Changes the Picture

Foreign or offshore buyers are treated as higher-risk borrowers, which affects both availability and structure of interest-only lending. Expect:

• Higher deposits / lower LVRs: Most banks cap LVRs around 60–65 % for overseas investors on interest-only loans.

• Shorter IO terms: Interest-only periods are often limited to 2–5 years, versus 10 years for local investors.

• Extra scrutiny: Lenders will require detailed evidence of income stability, rental yields, and a clear principal-repayment plan.

• Currency and enforcement risk: Banks worry about exchange-rate volatility and difficulties enforcing offshore defaults.

• Limited credit history: Lack of NZ credit data reduces confidence and appetite.

• Internal policy variation: Some banks simply don’t offer interest-only lending to non-residents at all, while others restrict it to specific scenarios (e.g. NZ citizens working offshore).

• Reversion risk: When your IO period ends, refinancing may not be guaranteed. If income or property values have changed, you could be forced into rapid principal repayment or restructuring.

How LVR & Regulation Interact with IO Lending

RBNZ macro-prudential controls directly limit how much “high-LVR” lending banks can issue — especially for investors.

• Only 5 % of new investor loans can exceed 70 % LVR.

• Because interest-only lending carries higher default risk, lenders often demand an even lower starting LVR (more equity).

• Expect tighter servicing tests, higher interest margins, and smaller loan caps.

• Falling valuations or currency shifts can also raise your effective LVR mid-term, creating refinancing risk when your IO period expires.

Practical Scenarios

Resident investor: A local borrower secures a $500,000 investment loan at 70 % LVR with a 5-year interest-only term. Straightforward.
Overseas investor: A non-resident with strong rental cash flow might access a 3-year IO term at 60–65 % LVR, subject to stricter documentation.
Short-term bridge: An expat returning to NZ may use a 2-year interest-only loan while transitioning income or residency, then refinance to principal + interest.

Risks & Trade-offs for Overseas Borrowers

• No principal reduction: Your balance stays the same; equity growth depends on market performance.

• Higher cumulative cost: Interest-only loans cost more over the full term.

• Refinancing risk: If the market dips or your income changes, rolling over the loan can be difficult.

• Valuation shifts: Declines in property value can push your LVR above safe levels.

• Currency fluctuations: Offshore income volatility can hit your servicing capacity.

• Policy changes: Interest-only criteria can tighten at any time.

• Exit planning: You must show a credible path to eventually pay down principal—through sale, refinancing, or income growth.

Best Practices for Overseas Investors

• Show a track record of investment success and financial stability.

• Use stable currencies (AUD, USD, GBP) and provide clear income evidence.

• Accept a lower LVR / higher deposit to offset risk.

• Limit your IO term to 3–5 years to demonstrate prudence.

• Present cash-flow and rental projections backed by realistic assumptions.

• Be transparent about your exit or amortisation plan.

• Work with a specialist mortgage broker experienced in non-resident lending.

• Reassess frequently — IO availability can change with RBNZ or bank policy shifts.

Key Takeaways

Interest-only lending remains possible for overseas investors in New Zealand, but it’s tightly controlled. Expect:

• Stricter loan-to-value caps and shorter terms.

• More due-diligence and income verification.

• Higher pricing and closer lender scrutiny.

If approved, plan carefully for the transition back to principal-and-interest and keep liquidity for rate or valuation shocks. Working with an experienced NZ mortgage broker is the most reliable way to identify which lenders still accept offshore investor applications.

Talk to a New Zealand Mortgages adviser to understand current options for interest-only or investment lending and structure your finance for both compliance and flexibility.