With the Reserve Bank of New Zealand (RBNZ) announcing they will implement tighter Loan-to-Value Restrictions (LVRs) for residential property investors on 1st October 2016, it may be time for property investors to think outside of the box.
All the major banks have already imposed the 40 percent deposit restrictions, even before the official date of 1 October. Some banks have even used slight changes to an approval as a means to withdraw it completely.
This is clearly worrying for property investors looking to increase their property portfolios now, and in the future. However, there are strategies which property investors could implement which could mean they may be exempt from the new lending rules.
Exemptions for residential property investors
There are exemptions around the LVR restrictions which means you may be able to obtain finance without incurring the high LVR deposit restrictions. Some of these exemption include:
- New builds (though limited options over 80% LVR) – in Kapiti there is still a reasonable amount of land
- Bridging finance
- Re-financing current high LVR loans
- Funding for repairs that are needed due to a natural disaster or weather tightness
- Non-bank lenders funding
- You can still leverage up to 80% of your owner occupied home to create an investment property deposit
What is the outcome for the wider market?
The idea is to slow down the property market and make more stock available to first home buyers.
There is also the option of going through a non-bank lender. The NZ Advisor recently highlighted in an article that there appears to be a slight increase in investors going to non-bank lenders. This is certainly an option for those needing to immediately fund an investment property and if they don’t mind paying slightly higher interest rates.
Whether you are looking for financial advice in general, or seriously considering property investment, talk to a mortgage adviser who has knowledgeable options available to think outside the square and knows exactly what each bank is doing.