What deposit do I need for an investment property?
You’ve bought your first house and now you are starting to think about adding another one and developing your property portfolio. Or maybe you are already a seasoned investor, but aren’t too sure how the new LVR changes will affect you. Let’s take a look….
Back in 2016 investors made up 28% of the market, which triggered the implementation of LVR's under the last National government. This was done to try and put the reins on a hot market, and claw back some control over house prices rising.
During the Covid outbreak in 2020, the Reserve Bank lessened (suspended) the rules around Loan to Value Ratios (LVR’s). This meant that it was possible to buy an investment property with as little as 20%, and was done mainly to give a boost to the property market, which was expected to suffer majorly as a result of Covid and the lockdowns.
We all know that didn’t happen, with the property market soaring higher than ever, with Q4 of 2020 showing 27% of the market were investors. So in early December the Reserve Bank announced that LVR’s would be reviewed in March 2021, and that a 30% deposit would be required on all investment lending. Right away, ANZ implemented 60% LVR requirements, with BNZ, Kiwibank and Westpac following suit a couple of months later.
While the change in LVR’s might make it slightly harder to get on to the investment property ladder, and a 40% deposit is considered the norm, there are always a number of various options that can be explored.
All in all, it is some very confusing times if you don’t know what all lenders are offering, and each has a very specific set of lending criteria and rules. With the RBNZ changes coming in March 2021, we can be sure that things will change yet once again. We are seeing a lot of investors look for ways to meet exemption rules or use non-bank lenders (which aren’t subject to the RNBZ rules). These non-bank lenders have extremely competitive interest rates. Finding these loopholes allow investors to continue to purchase with a lesser deposit and grow their portfolio.
Land and build is also not subject to LVR’s and this is unlikely to change come March 2021. So a new build is potentially another good option for investors too, and we can offer advice around this. Note even though exempt some banks are not currently treating as such with their own policy trumping that of RBNZ rules.
We can honestly say it’s never been more critical to get the right advice, and we have our finger on the pulse with what all lenders are offering. Securing the right loan and staying on top of potential changes in policy that could impact investment decisions is more vital than ever.
We can sit down and have a chat with you, and work out a plan that suits your individual circumstances and finances. Give Loan Market a call today on 03 441 1307 and we can work with you on purchasing that next investment property.