Buying a Bach in Wellington: Home Loan Tips & Insights

You'll Need a Larger Deposit for a Holiday Home Than Your First Property

A holiday home loan typically requires at least 30-40% deposit.

Lenders view holiday properties differently from owner-occupied homes. A bach in Pauatahanui or a crib near the Wairarapa coast represents additional borrowing on top of your primary residence in most cases. That means higher risk, which translates to stricter deposit requirements. Where you might secure a residential property with 10-20% down, a second property for holidays usually needs 30-40% upfront. Some lenders will consider 20% if your primary home has substantial equity and your income can comfortably service both loans, but that's negotiated case by case.

Consider a buyer who owns a home in Kelburn worth $950,000 with a $420,000 mortgage remaining. They want to purchase a bach in Makara valued at $680,000. Even with $530,000 in equity on their Wellington home, lenders will still require around $200,000-$270,000 deposit for the bach purchase. The remaining equity in the primary property can sometimes be used as security, but the new lending will need to sit at or below 70-80% LVR when both properties are considered together.

Interest Rates Run Higher When the Property Isn't Your Main Residence

You'll typically pay an additional 0.25% to 0.75% on your mortgage rate for a holiday home.

Banks price holiday home loans differently because the property isn't generating rental income and you're not living there full-time. It's purely discretionary. If financial pressure hits, lenders know you'll prioritise the roof over your head before the weekend getaway. That risk gets priced into your rate. Most major lenders including ANZ, ASB, BNZ, Westpac, and Kiwibank will apply a margin above their standard owner-occupied rates.

The exact margin depends on your overall LVR and how much equity you hold across both properties. Someone with 50% equity in both homes might see a smaller margin than someone stretching to the 70% LVR threshold. When comparing fixed rate options versus floating rate loans, factor in this loading on top of the advertised carded rates. A 2 year fixed rate that looks appealing for your main home might be less compelling once the holiday home margin is added.

You Can Use Equity from Your Wellington Home to Fund the Purchase

Releasing equity through refinancing your existing property can cover part or all of your bach deposit.

Many buyers around Wellington already have significant equity in their primary residence after years of repayments and property value increases. Rather than saving cash separately for a holiday home deposit, you can refinance your existing home loan to access that equity. This involves increasing your current mortgage and using the additional funds as the deposit for your second property.

In a scenario where your Ngaio home is valued at $1,100,000 with $380,000 still owing, you have $720,000 in equity. Refinancing to release $250,000 would bring your loan to $630,000, still leaving you at a comfortable 57% LVR on the primary property. That $250,000 becomes your deposit on a bach near Martinborough or along the Kapiti Coast. Both properties would then secure the overall lending, and your total borrowing capacity across both loans would be assessed on your income and expenses. The refinancing route works well when your primary home has strong equity and you want to move quickly on a holiday property without liquidating other investments.

Deciding Between Fixed and Floating Rates for Your Second Property

Most buyers split their holiday home loan between fixed and floating portions to balance certainty with flexibility.

Your bach or crib might sit empty for months, then host extended family over summer, or you might rent it out occasionally to offset costs. That variability makes a pure fixed rate mortgage less suitable than it might be for your main home. A split loan structure gives you a fixed rate portion for predictable budgeting, while a revolving credit or floating rate component lets you make extra repayments when rental income comes in or you have surplus cash, without penalty.

A typical structure might put 60-70% on a 2 year fixed or 3 year fixed term, with the remainder on floating or revolving credit. The fixed portion locks in a known repayment amount, useful when you're managing two properties and want certainty. The floating portion absorbs any irregular payments. If you receive $8,000 in rental income over January, that can go straight onto the revolving credit without triggering break costs. When rates are volatile, some buyers lean more heavily into fixing. When they expect to make large lump sum payments from bonuses or business income, they keep more on floating terms.

What Lenders Want to See Before Approving a Holiday Home Loan

Your borrowing capacity is assessed on total income against both mortgages, plus an estimate of holding costs for the second property.

Lenders calculate whether your income can service your existing home loan, the new bach mortgage, and all the additional costs of owning a second property. Rates, insurance, and maintenance for a coastal property can add up quickly. A bach near the sea faces higher insurance premiums and ongoing upkeep. Banks will add a margin to your stated expenses to account for these costs, even if you plan to offset them with occasional rental.

In our experience, lenders want to see rental income for at least 75% of the year before they'll count it toward servicing. A bach you use personally most of the time won't qualify. Your application will rely entirely on your salary or business income to cover both loans. If you're earning $180,000 combined household income and your current Wellington home loan repayments are $3,200 monthly, adding a $2,400 monthly repayment for the bach needs to fit comfortably within your surplus after living expenses. Most banks test this at a higher interest rate than you'll actually pay, often 7-8%, to ensure you can still afford repayments if rates climb.

How a Mortgage Broker Helps Structure Holiday Home Lending

A mortgage adviser can position your application with lenders who price holiday homes more competitively and structure the lending across both properties.

Not all banks treat holiday home loans the same way. Some have specific policies around second properties, while others fold them into standard residential lending with adjusted margins. A mortgage broker knows which lenders currently offer the most suitable terms for buyers in your situation, whether that's lower margins, higher LVR tolerance, or better offset features. They'll also structure the application to present your equity position and income in the most favourable light.

For buyers juggling two properties in different locations, having someone coordinate valuations, settlement timing, and funds flow saves considerable hassle. If you're releasing equity from your Thorndon home to buy a bach in Otaki, the timing of refinancing and settlement needs to align. Your broker manages that coordination with your lawyer and ensures funds are available when you need them. They'll also compare floating versus fixed rate splits across multiple lenders, accounting for the holiday home margin, so you can see the actual cost difference between a 1 year fixed and a 5 year fixed option once all loadings are applied.

Getting Your Application Ready

Call one of our team or book an appointment at a time that works for you. We'll walk through your equity position, assess your borrowing capacity across both properties, and structure a home loan that fits how you plan to use your bach. Whether you're buying along the Kapiti Coast, in the Wairarapa, or closer to Wellington, we work with lenders who understand holiday property lending and can get your application across the line with the right structure from the start.

Frequently Asked Questions