LVR (Loan to Value Ratio) Restrictions Announcement
At Loan Market Queenstownwe're often asked how the Reserve Bank's LVR rules, which came into force in October 2013, impact your borrowing ability.
LVR restrictions or speed limits were designed to restrict the amount of high-LVR lending a bank can engage in. These restrictions were designed to reduce the risk of an abrupt housing downturn and the loss of equity that would result, particularly for highly-indebted home owners.
The Reserve Bank imposed limits on the amount of high LVR lending (over 80%) a bank can engage over a set period of time. This limit was 10%, meaning there is still the ability to get a mortgage with the very low deposit or level of equity, but it is very limited meaning banks are far more onerous in their vetting of customers suitability for a mortgage.
While there is now an exemption in place for the construction of new houses and apartments, the LVR restrictions still remain the same. What has changed recently and is always being reviewed is the required level of UMI (Uncommitted Monthly Income) - the barometer banks use to calculate if you can afford to lend the money. (Please note all banks have a different opinion on what YOU can afford!)
UMI is the money left over on paper each month after all your monthly outgoings and mortgage repayment. (Please note all banks have a different monthly cost of living allocation, again ensuring all of their opinions on lending levels are different)
See below the current best guidelines for (UMI) amounts when considering all banks current expectations:
<80% LVR – +$100 per month UMI
>80% LVR – +$900 per month UMI
95% LVR – +$1,400 per month UMI
One of the many reasons you'd come see us at Loan Market is that these UMI rates change regularly bank by bank, and which bank we would place your business with would in part be dependent upon their position at that particular time.
Call us or send us a message now to discuss further or one of our FREE ‘Why Work with a Mortgage Broker’ mortgage seminars at the Crowne Plaza Hotel in Queenstown.
With our $10 billion dollar mortgage industry expected to double in New Zealand over the next 3 years it’s a good time find out about our role in the industry and how we support and inform YOU, save you time and stress by dealing with many lenders at once all at no cost to YOU.