Helping Clients Finance a Holiday Home or Bach

For many New Zealanders, owning a bach or holiday home represents a significant lifestyle goal - a place to anchor summer holidays, long weekends, and eventually retirement. Helping clients achieve that goal requires a clear-eyed look at how lenders approach secondary property lending, because the assumptions clients bring from their first home purchase often do not apply here.

How Lenders Assess Holiday Home Applications

Lenders in New Zealand generally treat holiday homes as investment properties unless the borrower can demonstrate clear owner-occupier intent. That distinction matters because it affects the loan-to-value ratio a lender will accept, the interest rate applied, and how the serviceability assessment is structured. Most lenders require a larger deposit for a holiday home than for an owner-occupied purchase, often in the range of 30 to 40 percent of the property's value, though this varies and changes over time as LVR restrictions are adjusted by the RBNZ.

Serviceability is assessed on the client's full debt position, including their existing home mortgage. Holiday homes rarely generate consistent rental income, and lenders are cautious about including holiday rental income in serviceability calculations unless there is a strong, documented track record. Clients who plan to list the property on short-stay platforms sometimes overestimate how much this income will help their application.

Using Equity from an Existing Property

Many clients who pursue a holiday home already own their primary residence and have accumulated meaningful equity. Using that equity as a deposit for the bach is a common approach, but it requires careful structuring. Cross-securitisation - where both properties are held as security for a single loan - can simplify the transaction but creates complications down the track if the client wants to sell one property independently. Many brokers prefer to structure the borrowing as a separate loan facility secured against the existing property's equity, keeping the two properties legally independent.

The equity calculation needs to account for LVR limits on both properties. If the client's primary home is already carrying a high loan-to-value ratio, there may be limited usable equity available without triggering LVR restrictions. Working through these numbers carefully before approaching lenders avoids wasted time and manages client expectations.

Location and Valuation Considerations

Holiday home valuations can be less straightforward than metropolitan residential properties. Many popular bach locations - Coromandel, Marlborough Sounds, Central Otago, Northland - have thinner comparable sales data, which can lead to conservative valuations. Lenders may also apply different criteria to leasehold properties, properties on cross-lease titles, or those with access challenges. It is worth discussing the property characteristics with a lender or credit assessor before lodging a formal application, particularly for anything unusual.

Some lenders apply a specific policy to holiday homes in certain locations or with certain physical characteristics. A bach on a remote coastal section with no all-weather road access, for example, may sit outside standard policy at some lenders and require a manual assessment or a specialist lender. Knowing which lenders are comfortable with the property type saves everyone time.

Insurance and Ongoing Costs

Holiday homes in New Zealand often carry higher insurance costs than primary residences, particularly in coastal or flood-prone areas. Following the changing approach insurers have taken to climate-related risk, some properties that were easily insurable a few years ago are now facing higher premiums or restricted cover. Lenders require evidence of insurance as a condition of lending, so it is worth encouraging clients to obtain insurance quotes early in the process - ideally before making an unconditional offer.

At Chaperone, we have seen clients caught off-guard by the true ongoing cost of a holiday home once insurance, rates, maintenance, and travel are factored in. Having that honest conversation early - about what the property will actually cost each year - helps clients make a fully informed decision rather than discovering the reality after settlement. When the numbers work and the lifestyle benefit is clear, a holiday home can be a wonderful long-term asset. Your job as a broker is to make sure the path to get there is well understood.