RBNZ-enforced LVRs gone for 12 months: What difference does it make?
As you’ll have heard, the Reserve Bank has lifted loan-to-value restrictions for the next 12 months. But with the rules relaxed, at least for now, what will it really mean for buyers, and for the property market at large? Here are some key things to know.
No LVR restrictions: What does it mean?
Under LVR restrictions, up until last month, most first-home buyers and property investors were required to put down respectively a 20 per cent or 30 per cent deposit to get a mortgage with a mainstream lender (a bank). But it’s important to note that low-deposit home loans were also possible, both through banks and non-bank lenders, provided the borrowers were able to prove their ability to service the mortgage and meet other lending requirements.
Also, keep in mind that is (and has always been) only one component of a much broader picture. And in this environment, lenders are likely to be cautious.
Your ability to service the mortgage matters
When assessing any mortgage applications, all lenders consider borrowers’ financial situation as a whole: your income, your debts, your credit history, your spending and savings habits. Plus, ‘no LVRs’ doesn’t mean ‘no deposit’: the bigger your deposit is, the more likely you are to have your mortgage approved (and at the advertised interest rate).
These requirements haven’t changed. And with Covid-19 affecting the financial circumstances of an increasing number of New Zealanders, lenders are actually likely to pay even more attention to these factors, to ensure they’re lending money to people who can pay it back.
Put your best foot forward
As mortgage advisers, we can help you find the most appropriate lender for your circumstances and maximise the opportunities of getting a mortgage approved. Here are some steps you can take to give your application the best chance of success:
- Know what you can afford: An application is a lot more appealing if it’s realistic and the buyer can show that they know they can meet the repayments. If you’ve got a budget and plan ready to go, all the better – although we can help you with this.
- Pay attention to your bank account: It’s not uncommon for people to have the odd instance where a forgotten direct debit or other surprise payment goes out, putting their bank balance into unarranged overdraft. But this is something your lender will check when assessing your mortgage application. So keep a close eye on your account conduct – you can often set up an alert to ping up on your phone if your balance drops below a set amount.
- Have good employment history: As we said, your lender is going to be interested in whether you’ll be able to service the loan into the future. It helps if you’ve been with your employer for a while, or if you are in an industry where you’re likely to be sought-after.
- Be upfront and honest: Trying to cover something up is a major red flag for any lender. So if there’s something negative your past – or present – fronting up with the truth, and an explanation, is the way to go.
Please get in contact with us
As your mortgage advisers, we can help you make sure your home loan application is up to a high standard before it even touches a bank or lender.
We’ve helped many New Zealanders like you into their homes over more than two decades. We can tell you whether there’s anything that might raise eyebrows, and what you can do to fix it. Have you got your sights set on a property move this year? Please get in touch.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.