Mortgage interest charges now at 75%
Property investors across New Zealand are being financially impacted by mortgage interest charges.
On 27 March 2021, new legislation was introduced to cap property investors claiming 100% of their mortgage interest charges.
For an investment properties purchased after March 27, 2021, owners can only claim 75% of mortgage interest charges before the percentage drops to 50% on 31 March 2023.
Lucia Xiao (pictured), founder of Auckland brokerage Finax, said investors were concerned when the legislation changed last year.
“It was a time for panic as investors were only given one week’s notice that the rules about mortgage interest charges were changing,” Xiao said.
“If an investment property was purchased before this date, then the purchaser was still able to make a four-year tax deduction, however people were still rushing to secure a property before the cut-off date.”
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Xiao said after the legislation changed, many investors sat on the fence when it came to buying an investment property.
“Many of my clients were considering what should we do,” she said.
“Last year many investors were selling their investment properties due to the changing legislation. For the seasonal investors with big loan portfolios, it was a good time for them to buy. On the flip side you have the mum and dad investors who were beginning to panic. It was a big hit which no one was prepared for.”
Xiao said the legislation only affected existing dwellings and was not related to new builds.
“This has shifted investors to consider buying new builds or off-the-plan properties,” she said.
“However, it depends how savvy of an investor you are. I encourage my clients to buy property and invest in property too.”
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Xiao is also a property investment mentor and author of a property wealth book - Financial Freedom: 5 Steps, 5 Years.
The seasoned investor is suggesting to her clients that they consider purchasing an investment property in the current market.
“Now is a great time to buy as interest rates are still quite low and property prices are dropping,” she said.
“Property is a great tool to build on your assets and create wealth. I highly suggest reaching out to mortgage experts, brokers and property developers as it will cost you more money in mistakes, so avoid them and speak to the professionals who can help you,” she said.
“I recommend investing in yourself and spend the time and money to learn these lessons properly.”
