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Turnkey vs. Construction Loan Calculator (NZ)

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.

Q: Ready to run your exact numbers?

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 true cost of turnkey against construction, factoring in holding costs and the overlap penalty.

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.

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.

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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.

Ready to run your exact numbers?

The choice between Turnkey and Construction dictates exactly how your cashflow will look for the next 12 months. We specialise in structuring new build finance so you can focus on moving in, rather than stressing over progress payments.

Book a Free New Build Strategy Session

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