New

Mortgage Break-Even ROI Estimator

Q: What is the main difference between a turnkey and a construction loan?

There is no single 'good' yield, as it depends entirely on the region and the property type. Generally, in major centers like Auckland or Wellington, a gross yield of 3.5% to 4.5% is common, with investors relying more on capital growth. In regional New Zealand, investors typically target higher gross yields of 5% to 7% to ensure the property is cash-flow positive.

Q: What is the "Overlap Penalty" when building a house?

Gross rental yield is calculated using the formula: Annual Rent ÷ Purchase Price x 100. This gives you a percentage that represents the total annual rent as a proportion of the purchase price.

Q: Why do turnkey homes cost more upfront?

Both new builds and existing properties have different yield characteristics. New builds often have lower gross yields but may offer better depreciation benefits and lower maintenance costs. Existing properties in regional areas typically offer higher gross yields. Compare the full pros and cons in the New Build vs. Existing Property Investment guide.

Q: What deposit is required for a turnkey vs. construction loan in NZ?

No, rental yield calculations exclude mortgage interest. Yield is calculated based on the purchase price and rental income, not your financing costs. Mortgage interest is a separate consideration when calculating your actual cash flow and return on investment.

Don't let the initial shock of a penalty fee trap you into overpaying interest.

Loan Balance $500,000

Current Fixed Rate 6.8%

Proposed New Rate 5.5%

Quoted Break Fee (From Bank)

Months Left on Current Rate 14 Months

Estimated Interest Saved Per Month

The pure interest reduction indicated by dropping your rate.

Estimated Break-Even Horizon

0 Months

The approximate time it takes for your savings to offset the penalty.

Estimated Net Benefit

Because your estimated break-even horizon is shorter than your remaining term, breaking your mortgage today could potentially result in a net financial benefit before your original contract ends.

*This calculator provides an indication only and does not constitute financial advice. It compares the pure interest reduction against the quoted break fee to estimate potential viability, assuming loan terms and principal repayment trajectories remain equal. Actual outcomes will vary. Always verify your break fee quote directly with your lender and seek professional financial advice before making changes.

Understanding New Build Mortgages

What is the main difference between a turnkey and a construction loan?

A turnkey property is purchased as a fully completed package; you pay a deposit upfront and the remaining balance only upon settlement when the house is finished. A construction loan requires you to purchase the land first and then make progressive "drawdown" payments to a builder as they hit specific construction milestones.

What is the "Overlap Penalty" when building a house?

The overlap penalty occurs during a construction loan when you must pay your normal living rent at the same time as paying mortgage interest on the land and the progressive build stages. Because the house isn't finished yet, you are paying for two places to live simultaneously. Turnkey homes avoid this penalty because you do not pay the mortgage until you move in.

Why do turnkey homes cost more upfront?

Turnkey homes have a higher sticker price because the property developer bears all the financial risk and holding costs. The developer pays the interest on the construction loan, manages council delays, and absorbs the risk of material price increases. They bake these holding costs, along with their profit margin, into the final sale price.

What deposit is required for a turnkey vs. construction loan in NZ?

In New Zealand, banks generally require a 10% deposit for a turnkey property (or 5% if using the Kāinga Ora First Home Loan scheme). Construction loans outside of Kainga Ora First Home Loan are considered higher risk and typically require a 20% deposit against the land purchase, and an overall deposit equating to at least 10% of the total project cost.

Tools