HIGH LVR MORTGAGES
High LVR Mortgages (Loan-to-Value Ratio)
In the last few years New Zealand homeowners have seen big changes in the world of mortgages. The Reserve Bank announced sweeping changes to high loan-to-value ratio (LVR) home loans, in an attempt to control the property market.
At HFC Finance , we can help you navigate those changes and find mortgage solutions for you.
What Exactly are High LVR Mortgages (or Low Deposit Mortgages)?
A loan-to-value ratio is a measure of how much a bank lends against mortgaged property, compared to the value of that property.
In New Zealand, when we talk about high loan-to-value ratio lending, we are generally referring to someone with less than a 20 percent deposit, or a loan-to-value ratio of greater than 80 percent. This is considered a ‘low deposit’ loan.
What the Reserve Bank Restrictions Mean for You
The Reserve Bank’s rule on high LVR mortgages came into effect on October 1st, 2013.
The restrictions in place are a form of speed limit on the Banks. They constrain the amount of low deposit / high loan-to-value ratio lending that the Banks can make.
In May 2020, the Reserve Bank temporarily removed the LVR restrictions for 12 months, this to allow the Banks to assist those requiring Mortgage deferments.
The bottom line is that young Kiwi first homebuyers have found it hard to get approvals for a mortgage with less than a 20% deposit from the Bank – not impossible, simply hard. Those wishing to refinance to consolidate debt will also find it hard and those wanting to buy investment property will need at least 20% deposit in Auckland and 20% elsewhere. Mortgages do not have to come from Banks, just call us for options.
How to Get Around the LVR Restrictions
So are there alternatives? Yes. Thankfully, there are. HFC Finance has great mortgages for those with less than 20% deposit, at pretty much bank rates.
This is especially beneficial for first home buyers needing a low deposit mortgage. Deposits can be saved funds, Kiwisaver, gifts or a mixture of all three.
Our expertise in high LVR mortgages is particularly useful for:
- Low-deposit first home buyers
- Investors who do not have large cash or equity deposits