LVRs Under Review by the RBNZ

[mahogany]

thanks for all the good advice

[MikeC]

85% is already crazy. You'd have to be mad to consider going to 90%, and quite frankly so would anyone who lent to you at that level. It would only take a small drop in the market for you to have serious issues.
my advice? Sell one of the rentals now and stay under 80% at a maximum.

[mahogany]

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[MikeC]

I'm feeling comfortable with my own home at around 50% and half a dozen investment properties averaging just under 80% LVR (all in Wellington). All investments are cash flow positive, and ones actually with Sovereign at 85%.
i think Wellington is going to see good gains in the near future (unlike Christchurch) and I'd love to have a few more properties, but think it would be risky to go over 80% overall.

[mahogany]

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[AlFa]

it sounds like you are in a great financial position. Do you know alot about the christchurch market being from wellington? how long have you owned your family home? Do you mind if I ask your age group?

Are you doubting his qualification or what? Mike gave you free advice and it's up to you to take it into account or not. Furthermore I totally agree - 80% LVR is high enough but hey, I'm in AKL so what would I know about CHC :-P

[Anthonyacat]

It's nice that the first advice here was conservative. Stick below 80% is good advice. You can grow a portfolio at a safe and comfortable rate without much risk of the whole thing falling over.

Ten years ago I recall hearing people celebrate that the bank would lend them 95% on new properties. Not long after that we had 100% mortgages. Did we ever get to the 105% madness that they could get in the USA?

To preempt questions on my background, I am a Chartered Accountant specialising in property, and own three properties myself (maybe four by Christmas).

[BigDreamer]

Wow. Regardless what your income level is I would never recommend put chafing at more than 80% lending. Especially not in a heated market and not with one back which has your PPOR as well!

If anything bad happens to the market you have a high chance of losing your PPOR along with your investments. I definitely would not recommend any further purchases.

[MikeC]

I see mahogany has removed/edited the original post, which is a shame, and makes any further discussion a little pointless.

[mahogany]

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[brokerman]

Looking at Auckland only. Outside of mainstream banks who are hogtied by the RB. For rentals at 80% 5.29% for two years 85% 5.79% for two years and 90% 6.29% for two years. All of these are standalone with interest only an option too. Whether or not people chose to use these is a personal matter, all I know is that a heap of deals are running at the 80% and only one or two at the 90% mark.

[Nextmove]

New LVR Restrictions and using equity to buy

We have around 65% equity in our current home and would like to use what we can of this as a deposit against a new more expensive property. We would rent out our current home and look to sell it in 7-10 years to help us pay down the mortgage of the new home. With the new LVR lending restrictions we have found that we can't borrow anywhere near as much as we'd thought we would be able to. We are interested to know how property investors are managing get get around these new restrictions (if they are?!) and how? Admittedly we are looking to buy in Aucklands Eastern bays (where our current home is) so we're not talking small sums, but it does seem that the banks are being overly conservative. Are we missing something? Any advice would be appreciated.

[Damap]

The difference is 10% Nextmove so not that big a deal. And if you were buying the new home to live in you should be able to get an 80% lend on that I think. Well 100% in fact with your current equity. So what exactly is the issue you face?

[Nextmove]

The issue the banks have seems to be around serviceability. Although we would transfer the mortgages on both homes to Interest Only (for the time being) they have calculated their lending on a P&I basis and are looking at serviceability of the loans on both homes combined, rather than the rental property as a seperate entity with its own income stream.

[Damap]

They will take 75% of the rental income as income so step 1 if you haven't done it is to get a rental appraisal on your home. Other than that if you don't have enough income then the bank shouldn't lend you the money if you know what I mean.

There are lots of things hardcore investors do to get a deal over the line such as having boarders to show more income etc. but in your case it sounds like you are not seasoned investors just trying to buy a second home and keep home 1. I live in Eastern Beach so I know what you mean about the area. Your problem may be that the yield on your current home is very low so that is affecting servicability.
In that case my advice is to maybe sell and buy your new home. The use the cash and equity to buy an investment property that has more income for less purchase price than your current home. For example your house may be worth 1.3 mil and rent for $700 a week. You could buy a home and income or 2 units for the same money and be getting over $1000 a week rental income which helps your servicing.

Only other thought which one of the broker can comment on is you could go to Resimac or another non bank lender and get the money yu need. Interest rate is slightly higher but they are more flexible than a bank. I would only advise this if your current home is a really good investment property. if not why not sell it and get something better?

Forgot to say I am assuming you are using a broker. If not then get one. They may be able to get you the money no problem.
I use Hamish who is on this forum he is excellent.
Hamish M: 021 625 693 | P: 09 625 4693