If you already own your home, you may now be able to buy your next one with as little as a 5% deposit and keep your existing property as a rental instead of selling it. That's a real shift from twelve months ago, when most banks capped lending at 80% LVR for anyone who already owned property. Some lenders now offer up to 95% lending for owner-occupied purchases, even if you already own another property.
That matters most if you're looking to move up rather than sell up. Take a buyer we recently worked with: she owned her home outright, worth around $780,000 with about $500,000 owing, and wanted to buy a new family home priced around $1.05 million while keeping her existing property as a rental. Her bank would only lend against her existing home up to 70% LVR, so releasing enough equity to fund the deposit on the new purchase meant refinancing that property to a non-bank lender at 80% LVR instead, an extra, more expensive step to bridge the gap.
Under the newly available 95% owner-occupied policy, a case like this looks very different: the new purchase itself can now be funded with as little as a 5% deposit through a mainstream bank, sharply reducing how much equity needs to come out of the existing property. That keeps things simpler and cheaper, and lets you hold onto the original home as a rental exactly as planned.
If you own an investment property, the standard ceiling for borrowing against it has typically sat around 70% LVR. We currently have two banks willing to go higher, with one considering up to 90% in the right circumstances. That's useful if you want to release equity from a well-performing rental, to fund a renovation, consolidate higher-cost debt, or put a deposit toward another purchase, without disturbing the rest of your portfolio or refinancing everything at once.
This flexibility is showing up because the Reserve Bank has eased its LVR speed limits. In practice, debt-to-income (DTI) ratios and affordability testing are doing more of the heavy lifting now than LVR ever did.
Our honest read is that this window won't stay this wide open. Banks operate within an overall pool of high-LVR lending they're allowed to write, so as more people become aware of these settings and use them, we'd expect the more generous policies to tighten again. If either of the situations above sounds like yours, the value is in acting on it now rather than assuming it'll still be there in six months.
If you've been told "no" on an LVR basis in the past year or two, it's worth a quick conversation with us before assuming your options are still limited. Lending policy is moving fast, and what's available today may not be available for long.
If you would like to discuss this further or have a review to see what options you have, the team at Kris Pedersen Mortgages is happy to help and provide market-leading mortgage advice. Please get in touch with them at info@krispedersen.co.nz or call the office at (09) 486 4719 for a no-obligation chat.
