Most New Zealanders have become property investors by carrying out the great kiwi tradition of upgrading houses as they move through the various stages of life.
A typical example involves a couple with a growing family moving from a 2 or 3 bedroom house to a larger family home. The family is familiar with the area the original home is located and believe would be a good rental property. The family will generally have reduced the mortgage levels on the original home and have a significant level of equity (difference between value of the home and outstanding mortgage). Given the level of equity in the original home, the family might be able to borrow 100% of the purchase price from the Bank for the new home.
Unfortunately none of the interest on the new borrowing would be tax deductible as it relates to the purchase of a private asset. By restructuring the homes and debt, we are able to increase the interest deductions.