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Turnkey vs. Construction Loan Calculator (NZ)

Q: Question 1: What exactly is a Turnkey property?

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: Question 2: What are 'progress payments' in a construction loan?

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: Question 3: Do I pay a full mortgage while a progressive build is happening?

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: Question 4: Do I need a 20% deposit to build a house?

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.

Q: Question 5: I know which option I want—what is my next step?

Running the yield on a property is the first step. The second step is proving to the bank that the rent, combined with your personal income, is enough to secure the mortgage. At Home Loan Factory, we specialize in structuring investment finance and can run your figures through the exact servicing test the banks use to tell you instantly if you will be approved for the purchase.

Compare the upfront cash flow and long-term costs of buying a turnkey property versus funding a progressive new build

Head-to-Head Calculator

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Please rotate your phone sideways (landscape mode) to view the Head-to-Head Comparison.

Your Total Cash Deposit ($)

Your Current Rent ($/wk)

Turnkey Option

Turnkey Sticker Price ($)

No Overlap Penalty: You just pay your normal rent until the house is finished. The developer pays the holding interest on the build, which is why the sticker price is higher.

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Construction Option

Land Purchase Price ($)

Build Contract Price ($)

Land Rate %

Build Rate %

Build Time (Months)

Turnkey Reality

Sticker Price

$900,000

Cashflow Requirement No overlap. You only need to budget for your normal rent ($650/wk) until handover day.

Construction Reality

Sticker Price (Land+Build)

$850,000

Interest During Build

+$10,822

Calculated across 5 progressive drawdown stages. You only pay interest on the exact portion released at each stage.

The Overlap Penalty You must pay rent AND the mortgage simultaneously. Your weekly outgoing will peak at $1,237/wk right before handover.

Which Build Path is Right For You?

‍Building a new home is a massive milestone, but figuring out how to finance it can be a bit of a headache. The biggest choice you will make is whether to buy a 'Turnkey' package or take out a progressive Construction Loan. This calculator puts both options side-by-side so you can see exactly how they will impact your wallet while the house is being built.

It is 100% free to view your estimates with no mandatory sign-ups, logins, or hidden data capture.

1. The Turnkey Route

How it works: You pay your deposit (usually 10%) upfront to secure the section and the build. You don't pay another cent until the house is 100% finished and you get the keys.
The benefit: Because you aren't making mortgage payments during the build, it is much easier to keep paying your current rent while you wait to move in.

2. The Construction Loan Route

How it works: You usually buy the land first and take ownership of it. Then, the bank pays your builder in stages (drawdowns) as they complete each phase of the house.
The benefit: While you do have to make 'interest-only' payments to the bank during the build phase (which can be tough if you are also paying rent), progressive builds often end up being slightly cheaper overall, and they give you much more control over customising the house.

Next Step: Navigating Bank Requirements

‍Both of these options require specialized bank approvals, including Fixed-Price Build Contracts and 'as-if-complete' registered valuations. Send your estimates to a Home Loan Factory adviser, and we'll help you figure out which option best fits your current income and cash flow, so you can build with confidence.

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FAQS

Understanding New Build Mortgages

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Question 1: What exactly is a Turnkey property?

A turnkey property is purchased as a fully completed packag'Turnkey' simply means the house is completely ready to live in the day you settle—you just turn the key in the door! You pay a deposit upfront to lock in the contract, and the developer uses their own money to fund the build. You only draw down your mortgage and pay the final balance on the day the house is fully completed.e; 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.

Question 2: What are 'progress payments' in a construction loan?

If you choose a progressive construction loan, the bank won't give your builder all the money on day one. Instead, they release the funds in stages—for example, a chunk when the foundation goes down, another when the roof goes on, and the final chunk when the house is finished. This protects both you and the bank from paying for work that hasn't been done yet.

Question 3: Do I pay a full mortgage while a progressive build is happening?

No, you don't pay a full mortgage from day 1, but you do pay interest. Banks generally allow you to make 'interest-only' payments during the build phase, and they only charge interest on the money that has actually been released to the builder so far. Once the house is finished, your loan switches to standard principal and interest payments.

Question 4: Do I need a 20% deposit to build a house?

Usually, no! Because the Reserve Bank wants to encourage more new housing in New Zealand, new builds are generally exempt from strict Loan-to-Value Ratio (LVR) rules. This means many banks are very happy to approve both Turnkey and Construction loans with just a 10% deposit, provided you meet their standard income checks.

Question 5: I know which option I want—what is my next step?

Getting a new build approved requires some very specific paperwork, including building consents, fixed-price contracts, and registered valuations. The easiest next step is to chat with a Home Loan Factory adviser. We know exactly what each bank requires for both Turnkey and Construction loans, and we will guide you through the whole process for free.

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