LVR Restrictions Are Here If buying your first home wasn’t stressful enough, it just got a lot more complex and expensive if you have less than 20% deposit. From 1 October the Banks’ can only allow 10% of their lending to be for borrowers with less than 20% deposit. Currently the banks have so many pre approvals in their pipeline they started pulling back on approving loans over 80% in early September. ASB even cancelled existing pre approvals over 80% due to their high exposure. It’s quite possible that once the dust settles in 4-6 months’ time, the banks may start to be more lenient on approving loans with low deposit. However when that time comes it’s unlikely that you will get a pre approval lasting 6 months. Banks have also increased low equity fees for over 80% borrowing. Rates discounts are also unlikely for high LVR borrowers. Whilst the market has got a lot tougher, there are still ways to make it work. I cannot stress enough how complex the solutions are however and each depends on the individual borrowers circumstances. You have non-bank lenders willing to go to 90% but 5% needs to be genuinely saved. Welcome Home Loans have allowed bigger income earners to qualify but you need a 10% deposit (saved or gifted). Borrowing via personal loans to top up the deposit can only work in rare cases. We do have a lender offering loans under similar criteria to the previous Welcome Home Loans (no deposit to $200k) but come at a higher cost. How many parents are willing to front up as guarantors also remains to be seen based on their own financial circumstances and appetite for risk. Parental loans or gifts may however help get a deposit up to that 10% or 20% threshold. The alternative is to ride out the storm, avoid short term debt and unarranged overdrafts and save hard over the next 6 months. My gut feeling is the market cannot get much worse and patience may be a virtue. For a free copy of our First Home Buyer Guide contact our team 7 days a week on 0800 000 517 or email [email protected] for all your mortgage and insurance needs. The above article is general and is not specific to any person.
Posted on: Tue, 15 Oct 2013 20:36:24 +0000
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