Low Deposit Home Lending
What does loan-to-value ratio (LVR) mean?
When you take out a home loan, the loan-to-value ratio is the amount you borrow as a percentage of the total value of the home. For example, if you buy a home for $100,000 with a deposit of $20,000, you’ll need to borrow $80,000. Your loan of $80,000 is 80% of the value of the property – so your loan-to-value ratio (LVR) is 80%.
Why have banks decided to reduce the amount of high LVR lending it does?
The restriction on high LVR loans is not something the banks have decided to do. The Reserve Bank of New Zealand (RBNZ) has imposed these restrictions on New Zealanders through registered banks. These restrictions are part of a policy to reduce house prices and protect against the risk of a significant drop in house prices. Because of this, banks must reduce the proportion of new lending with an LVR of over 80%.
I need a pre-approval for lending over 80%, can I get this?
To help banks meet the RBNZ LVR restrictions, banks won’t be offering pre-approvals for lending with an LVR over 80%.
How do I purchase when I have less than 20% deposit?
The banks will access an application if it is a ‘live’ deal or falls outside the RBNZ restrictions. If you want to borrow over 80% of a property’s value, you will need to apply for a new loan
and meet the banks normal lending and security criteria will apply. Low equity fees will apply.
What is a ‘Live’ deal?
When you attend an auction or a tender, you need to be unconditional in all areas including finance. I will send an application for finance to the banks to access your application for one auction property at a time. If unsuccessful at the auction, that approval will end.
What about ‘Negotiation’ of a property?
Complete the negotiation of the house purchase as per normal, and ensure you put strong conditions on finance and due diligence requirements. Ensure you receive good legal advice from an experienced conveyancing solicitor. The finance clause should be 10-15 working days. If successful with the negotiation, then send the fully signed and dated sale & purchase and I will submit an application for finance. This will take up to 5 working days.
What falls outside RBNZ criteria?
You have options for purchasing a property off the plans. The banks will lend up to 90% LVR on off the plan builds.
I have a current pre-approval for lending under 80%, can I extend it?
If your pre-approval is for lending under 80% LVR, we can extend it. To extend a pre-approval you must continue to meet the bank’s lending criteria when they extend the pre-approval.
I have a high LVR mortgage with a floating interest rate. Will I be impacted if I switch from a floating rate to a fixed rate?
No. You will not be impacted by the new RBNZ LVR restrictions if you change your interest rate.