September 2016's Property Gazette
Understanding New Loan to Value Ratio Changes
Recently the Reserve Bank (RBNZ) has tweaked NZ’s Loan to Value Ratio in an effort to stop rising property prices. As a result, they have set in motion a few new directives for banks which are compulsory from 1st September 2016. Other lending institutions such as credit unions are not affected.
Loan to Value Ratios and What They Mean
Loan to Value Ratio or LVR, is the percentage of money a bank will lend based upon the value of the residential property. A high VLR is being discouraged by the RBNZ for both owner-occupied and investment properties, in an effort to slow the housing market. That means:
- Only 10% of the bank’s residential mortgage lending for owner-occupied properties within NZ, are allowed to have an LVR greater than 80%. This means that a deposit of at least 20% is required by the majority of buyers.
- Only 5% of a bank’s lending for investment properties within NZ can have an LVR above 60%. This means investors now need to have at least a 40% deposit to buy a new residential property.
There are some exemptions to the LVR changes, where a lender may allow a higher LVR for a property, including the construction of a new property or a short term bridging loan. We are more than happy to chat with you and see if your plans qualify for an LVR exemption.
Get a Low Deposit Home with a Mortgage Broker
One of the key advantages of using a Mortgage Broker is that we are not a bank. We don’t make decisions about who can or can’t have a mortgage. Rather, we work for you and help you to get the right mortgage for your situation and often at a lower than advertised rate. This is also true for buyers who have less than the required 20% or 40% deposit to buy a home.
As we work with banks and other lenders every day, we know which ones are willing to lend on lower deposits and which aren’t. We approach those lenders on your behalf and explain why your mortgage should be approved. Occasionally a high LVR loan adds a low equity premium or low deposit insurance to your mortgage. If this is the case, we may also be able to negotiate a lower rate for you.
Finally, we are also able to help you get your foot on the property ladder with a low deposit home loan if you meet criteria for either the Welcome Home Loan, First Home Buyers Subsidy or use savings from your Kiwi Saver. You can find out more about the assistance for owner-occupied buyers with less than 20% deposit here. We also have a free First Home Buyers guide, which is proving exceptionally popular with our clients.
If you would like to discuss how the LVR changes affect you, or start applying for a new mortgage, contact one of our friendly Mortgage Brokers today. Remember, we work for you and our services are always free.
Scott is wonderful to work with, which made the hole process so much easier and stress free. Highly qualified highly recommended. In there for the customersKarla Botting - 06 December 2023
Scott was fantastic to work with, honest and hard working, went the extra mile on everything, explained the nitty gritty jargon into easy to understand. Got us a great deal on our mortgage, put us with the right people. All in all 6 stars, if your buying then definitely call Scott at AMS!!Hamish Neilson - 06 December 2023
I used Scott at Advanced Mortgage Solutions for my first home purchase and am currently repurchasing a property through him again. Has been absolutely amazing and made the process extremely easy. Would recommend to anyone looking for a mortgage broker in Christchurch!Stacy Kamo - 29 November 2023
Scott and the team at Advanced Mortgage Solutions are great! Very knowledgeable and they make the house buying process very simple and easy to understand. Cannot recommend them enough!Scott Harris - 20 November 2023
Friendly and personalized service. Always happy to answer all my questions and love getting to see Gus when we meet in-person.Lisa French - 20 November 2023